Each company prices annuities differently. In
1991, a 65-year old woman buying, an immediate annuity could receive income of
around $9,000 to $10,000 a year for life in return for a payment of $100,000.
Annuity purchase rates are based on mortality
tables that reflect the expected survival rates as estimated from past
experience, and on expected investment earnings. Women pay slightly more than
men because they live longer, on the average, and therefore are likely to
collect more payments than men. This is just the opposite of the situation in
life insurance, where women pay less because of their greater longevity.
The following table gives examples of monthly
life income at 65, with 10 years certain, that might result from paying various
amounts into a deferred annuity contract for different periods of time. The
examples are based on contributions of $2,000 a year paid annually and
illustrative rates for men published in 1992.3 Also, for purposes of
this illustration, it is assumed that the contract values will accumulate at 7
percent per year. Taxes are not factored in either before or after retirement.
| Amount and Duration of Investment |
Total Accumulated |
Monthly Benefit (10 years certain) Starting at Age 65 |
| $60,000 over 30 years |
$202,146 |
$1,557 |
| $40,000 over 20 years |
$87,730 |
$676 |
| $20,000 over 10 years |
$29,567 |
$228 |
3 Women would be paid a lower monthly sum from the same investment
because on the average, they would receive it for more years.