Fixed annuities typically pay between three and four percentage points more than the 10-year Treasury bond, which today yields 2.3%. Competitive contracts now are paying between 5% and 6%; that means a $200,000 investment will kick off about $12,000 in annual income, more than double the $4,600 you’d get from a 10-year Treasury.
Clearly, there’s a caveat. With a Treasury bond, you collect the yield while you own the bond, and your initial investment is returned at maturity. With an annuity, your initial investment, or premium, is returned through your annual payouts. If you die young, you could end up collecting less income than you paid upfront. But if you live long, it could far exceed your original investment.
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