Which Pays More for Life: a $700,000 Annuity or a $700,000 Dividend Portfolio?

Try to picture $700,000 sitting in a rollover account. In this instance, you’ve got two options. You can hand it to an insurer and get a fixed check every month until you die. Or you can spread it across five income funds and live on what they pay. It’s the same money with two very different promises.

What the Annuity Promises

A single premium immediate annuity, or SPIA, is about as simple as insurance gets. You pay one lump sum, and the insurer sends you a fixed check for life. A single-life contract stops paying when you die. A joint-life contract keeps paying until the second spouse dies, so each check is smaller.

Quotes change every week and vary by insurer, age, and state. Get live quotes before you decide. Each check mixes interest with a piece of your own principal. They also include mortality credits, the money left behind by buyers who die early, paid to those who live longer. With the 10-year Treasury at 5%, the bonds insurers buy already yield more than the portfolio below, and that’s before any principal is returned.

Most annuity checks stay flat for life unless you pay extra for an inflation rider, so your buying power shrinks every year. Taxes work in your favor. Under the IRS General Rule, each payment splits into a tax-free return of your net cost and a taxable balance, based on what you paid versus the total payments you’re expected to receive. That split is called the exclusion ratio.

A Growth Anchor With the Smallest Check

Yields for the portfolio side use each fund’s forward annualized payout at recent prices. Vanguard High Dividend Yield ETF (NYSEARCA:VYM) owns hundreds of large dividend payers, and Broadcom is the biggest at about 7%. It gets a 30% weight, or $210,000. The forward yield is 2.2%, and the trailing yield is 2.3%, equal to roughly $4,570 a year.

It supplies most of the portfolio’s growth. Its share price rose 210% over the past ten years.

Trading Upside for Cash With Covered Calls

Amplify CWP Enhanced Dividend Income ETF (NYSEARCA:DIVO) is actively managed and holds blue chips like Caterpillar and Apple. It also writes covered call options on some of them. That means it sells buyers the right to purchase its shares at a set price. The fund takes in cash now and gives up any gains above that price. It gets 25%, or $175,000, and the 4.7% forward yield pays about $8,300 a year.

Monthly payouts usually run about $0.19 per share. An extra $0.95 payout in December 2025 drove the trailing yield up to 6.3%. Don’t count on that happening every year.

A Landlord That Keeps Raising the Check

NNN REIT (NYSE:NNN) owns 3,774 standalone properties, mostly leased to auto service shops, convenience stores, and similar businesses. The tenants cover taxes, insurance, and maintenance. It gets 15%, or $105,000, yielding 5.9% for about $6,240 a year.

Its latest raise to $0.62 per quarter was its 37th consecutive annual increase. The dividend uses 69% of AFFO, which is a REIT’s cash earnings, so there’s room left over.

Preferred Shares Get Paid Ahead of Common Stockholders

A preferred share sits between a bond and a stock. It pays a fixed dividend before common shareholders get anything and has no claim on the company’s growth. iShares Preferred and Income Securities ETF (NASDAQ:PFF) gets 15%, or $105,000. Its 6.6% yield pays about $6,970 a year, and the fund charges 0.45% in fees.

Preferreds trade a lot like long-term bonds. Rising long-term yields push their prices down, even when the payouts don’t change.

Treasury Bills That Move With the Fed

iShares 0-3 Month Treasury Bond ETF (NYSEARCA:SGOV) holds Treasury bills that mature within three months, so it works as the cash allocation. It gets 15%, or $105,000, and yields 3.6% for about $3,760 a year.

This yield moves with the Fed. Its monthly payout dropped from about $0.36 a share in August 2025 to $0.30, and it’ll keep falling if the Fed cuts rates.

And the Bigger Check Goes To…

Put together, the portfolio pays about $29,800 a year. That’s a 4.3% blended yield, or roughly $2,490 a month. Any annuity quote above 4.3% beats that, and a lifetime payout at a typical retirement age returns your principal.

The annuity is the better deal for people who live into their 90s and want certainty, because it can’t run dry. Its weak spot is the insurer. If the insurer fails, guaranty associations step in, usually in your state of residence, up to state limits. And if you die early, the money’s gone unless you paid for a refund feature.

The portfolio is the better deal for people who want the principal to stay theirs, go to heirs, and maybe grow. Some retirees split the difference. They buy just enough annuity to cover their fixed bills and invest the rest, running something like the paycheck-style income method we laid out in a free guide on the portfolio allocation.

Run These Numbers Before You Sign

1. Get three same-day SPIA quotes for both single and joint life, then compare each payout rate with the portfolio’s 4.3%.
2. Add up your fixed monthly bills. Covering only that amount with an annuity keeps the rest of your money working for you and your heirs.
3. Look at taxes on both sides. Annuities get the exclusion ratio, while REIT and preferred payouts are often taxed differently than ordinary dividends. Payments from a privately purchased annuity are considered net investment income for the extra 3.8% net investment income tax that applies above certain income levels.

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