Which Pays More for Life: A $665,000 Annuity or a $665,000 Dividend Portfolio?
Handing $665,000 to an insurance company sounds safe until you run the 20-year inflation math against a dividend portfolio that can grow its paycheck every year. The right choice depends on a number the annuity salesperson never volunteers.
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A $665,000 income portfolio yielding 4.5% throws off about $29,925 a year, or roughly $2,494 a month. But you could hand that same $665,000 to an insurance company for an immediate annuity instead. In exchange, you’d get a fixed monthly check for life, at a rate set by your age and current interest rates. Let’s compare the portfolio math with the annuity’s guarantee and walk through what each option gives up over a 20-year retirement.
How a Five-Fund Portfolio Gets to $2,494 a Month
The sample portfolio combines growth, option income, real estate, preferreds, and cash, and all yields below use each holding’s forward annualized payout divided by its recent price.
- Vanguard High Dividend Yield ETF (NYSEARCA:VYM), 30%: This fund yields about 2.3% and supplies the portfolio’s growth engine. Its share price rose 196% over the past decade.
- Amplify CWP Enhanced Dividend Income ETF (NYSEARCA:DIVO), 25%. The fund sells covered calls on blue chips like Caterpillar and Apple for a forward yield near 4.9%. It paid a special $0.95 per share in December 2025 on top of its regular monthly checks.
- Realty Income (NYSE:O), 15%: This net-lease REIT yields about 6.0%, pays monthly dividends, and recently declared its 115th consecutive quarterly increase. Occupancy stands at 99%.
- iShares Preferred and Income Securities ETF (NASDAQ:PFF), 15%: Bank preferreds push the forward yield to about 6.5%. Payouts swing, and the March 2026 distribution was just $0.03 per share.
- iShares 0-3 Month Treasury Bond ETF (NYSEARCA:SGOV), 15%: This T-bill fund yields about 3.6%, and its income varies with short-term rates. The monthly payout fell from $0.36 in August 2025 to $0.30.
Weighted forward payouts land near 4.3%, while trailing payouts, including DIVO’s special distribution, bring the blend up toward the 4.5% target. At that target, $665,000 times 0.045 equals $29,925 (we laid out the full mix, payout schedule, and withdrawal order behind this kind of paycheck-from-savings setup in a free guide here).
What an Annuity Quote Has to Clear
Insurers price immediate annuities off long-term bond yields. The 10-year Treasury stands at 5.2%, close to its one-year high of 5.3%, and that background tends to lift payout quotes. A monthly quote above $2,494 buys more current income than the portfolio. Part of every annuity check, however, is your own principal coming back to you. A single-life contract with no refund feature leaves heirs nothing, while the portfolio keeps the $665,000 in your name.
Three Yield Levels on the Same $665,000
At a 3.5% yield, typical of broad dividend growth funds, $665,000 times 0.035 equals $23,275 a year, or about $1,940 a month. You get the least income today, and the principal has the best odds of growing. Moving to a 6% yield from REITs, preferreds, and covered-call funds produces $39,900, or $3,325 a month. Dividend growth slows down, and option strategies cap upside.
A 10% yield from business development companies, mortgage REITs, and leveraged option funds pays $66,500, or about $5,542 a month. Distribution cuts and principal erosion are common at this level, so the income often shrinks along with the asset base.
Why Inflation Decides the Winner Over 20 Years
A fixed annuity check never rises. Under 3% inflation, a $2,494 payment buys about $1,856 in today’s dollars after 10 years. If the portfolio’s income instead grew 5% a year, the $29,925 stream would reach roughly $48,745 by year 10. At 8% growth, it would double to about $59,820 in nine years.
Realty Income’s monthly dividend rose from $0.2555 in mid-2023 to $0.2715. PFF and SGOV have no comparable growth engine. SGOV’s income also falls whenever the Federal Reserve cuts rates, and the fed funds upper bound currently stands at 4%.
Steps to Take Before You Sign or Buy
- Get at least three immediate annuity quotes for $665,000 at your exact age, with and without a cash-refund rider. Compare each monthly figure to $2,494 and ask how much of the payment is return of principal.
- Model the portfolio’s income for 20 years at zero growth and at 3% growth. Then compare it with the annuity’s fixed check adjusted for 3% inflation, so you can see the year the lines cross.
- Price out a split. Annuitize just enough to cover fixed bills. This covers what Social Security leaves unpaid, keeping the rest of the capital invested for growth and heirs.
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David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
