Faculty Publications

Title

Payout Rates and Returns on Income Annuities

Document Type

Article

Publication Date

8-27-2015

Abstract

The pricing of an income annuity is typically described using either the monthly income amount it generates, or as the annual payout rate of the income received as a percentage of the premium amount. For example, an annuity might offer $416.67 per month on a $100,000 premium. For 12 months, that sums to $5,000, which is 5% of the initial premium amount. In this case, the annuity payout rate is 5%. I generally describe annuity pricing by annual payout rate.