A $600,000 Annuity Pays $3,700 a Month for Life. What About Your Spouse?

A 65-year-old retiree walks into a meeting with $600,000 in an IRA and walks out with a pitch. Hand it over to an insurance company today, and a single-premium immediate annuity (SPIA) will pay $3,700 a month for life. That is $44,400 a year, guaranteed, with no market risk and no decisions to make ever again.

The agent leads with the stability of a guaranteed monthly check. But what happens if you die at 70 and your spouse outlives you by 20 years?

SPIAs are a legitimate tool. The question is whether the single-life version is the right choice for a household with two people in it. Consider this case study:

• Who this is for: 65-year-old married retiree, $600,000 IRA, no pension
• The offer: Single-life SPIA, $3,700/month, $44,400 annually
• Core issue: What the surviving spouse inherits if the annuitant dies early
• What is at stake: 20-plus years of a widow or widower’s income

What the math says

Today’s SPIA market for a 65-year-old male is paying roughly $600 to $650 a month per $100,000 of premium on a single-life basis. $3,700 a month on $600,000 sits inside that range and is a fair quote, though maybe not a generous one.

Recover principal in nominal dollars and the breakeven lands somewhere around age 78 or 79. Die before that and the insurer keeps the residual. Live to 90 and the contract has paid you roughly $1.1 million in cumulative checks, which is where the value shows up.

The implied yield on the premium blends interest with a steady return of your own capital. Strip it apart and the pure interest component lands modestly above today’s risk-free curve: the 10-year Treasury near 4.5%, the 30-year Treasury at roughly 5%, and the 52-week T-bill yielding about 3.8%. The insurer pockets the mortality credit on early death.

Then there is inflation. A fixed $3,700 check in 2026 will not buy $3,700 worth of groceries, Medicare premiums, or property tax in 2046. Headline PCE is running near 3.8% year-over-year, with services inflation close to 3.5%. Services is the line that matters most for retirees, and it has stayed above 3% for years.

Opportunity cost cuts the other way. $600,000 invested in a balanced portfolio earning a reasonable 6% annually, while withdrawing $44,400 a year, would still hold a sizable balance after 15 years. The annuity trades that residual asset for the guarantee.

Three Alternative Paths to Consider

1. Joint-life 100% survivor benefit. The same $600,000 quoted on a joint-life basis with full survivor coverage pays roughly $3,000 to $3,100 a month. Yes, the headline drops. What you buy with that lower number is the elimination of the catastrophic outcome: dying at 68 and leaving a 67-year-old spouse with zero income from the IRA. Layer in a 10-year period certain for an extra dollar or two of cost per month and the heirs are protected against a double early death too.
2. TIPS ladder plus delayed Social Security. Build a ladder of Treasury Inflation-Protected Securities with 10-year TIPS real yields near 2.1% and 30-year TIPS around 2.7%, then delay Social Security from 67 to 70 for roughly a 24% permanent boost in the base benefit. The real yield does the inflation work the SPIA cannot.
3. Annuitize a slice, not the whole thing. Put $150,000 to $200,000 into a joint-life SPIA to cover essential fixed expenses (housing, utilities, insurance) and keep the rest in a diversified portfolio with growth exposure. You get a floor without surrendering the entire estate.

Before you sign anything

First, the insurer’s credit rating and the state guaranty association cap, which is typically $250,000 per insurer per state. A $600,000 contract at one carrier exceeds that cap in most states. Splitting the premium across two or three highly rated insurers solves it.

Second, evaluate joint-life and 10-year-certain quotes side by side with the single-life quote. The agent who only shows one is not showing you the full picture.

The big mistake to avoid: a married retiree annuitizing the full nest egg on a single-life basis, with no survivor benefit, no period certain, no inflation rider, at one carrier.