The Single Premium Immediate Annuity That Pays a 73-Year-Old $4,800 a Month for Life and Takes Sequence Risk Off the Table

"Apply the 4% rule to $700,000 and you get $28,000 per year. The SPIA more than doubles that. The reason is the "mortality credit": the insurer pools many annuitants and accepts that some will die early, allowing it to pay survivors more than a bond portfolio could. No mutual fund, ETF, or laddered Treasury can replicate that mechanic, because none of them can pool longevity risk."

"The rate environment also matters. The 10-year Treasury yields almost 4.5%, the 30-year sits near 5.1%, and the Fed Funds rate has held near 3.75% for five months after 75 basis points of cuts from a 4.5% peak in September 2025. SPIA payouts are priced off long Treasuries, so today's rates lock in better income than retirees could have secured in 2020 or 2021."

"For a 73-year-old targeting $57,400 of annual income, here is what different vehicles require: 3.5% yield (dividend growth ETFs, broad equity income): roughly $1.64 million of capital. Principal stays intact and likely grows, but the capital requirement is more than double the SPIA. 6% yield (covered call funds, REITs, preferred shares): roughly $957,000. Income is higher, dividend growth slows, and principal can drift sideways for years. 8.2% SPIA payout: $700,000, with the trade-off that the principal is gone the day the contract is signed."

"The SPIA is irrevocable. There is no surrender value, no inheritance from that $700,000, and no liquidity if a roof, a medical bill, or a grandchild's tuition shows up. Payments are taxed as ordinary income, not long-term capital gains. And inflation matters: Core PCE has climbed from about 126 in May 2025 to roughly 129 in March 2026, so a fixed $4,800 will buy less in 2036"

A 73-year-old retiree with $1.4 million savings needs reliable monthly income for essentials without relying on strong market returns. The 4% rule applied to $700,000 yields about $28,000 per year, while a single premium immediate annuity (SPIA) can more than double that payout. The higher income comes from mortality credit, where insurers pool many annuitants and pay survivors more when some die earlier. Current interest rates also improve SPIA pricing because payouts are tied to long Treasuries. To target $57,400 annually, dividend growth strategies may require about $1.64 million, higher-yield options about $957,000, while an SPIA can do it with $700,000. The trade-offs include irrevocability, no inheritance, no liquidity, ordinary income taxation, and inflation risk.

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