Should a 70-Year-Old Buy an Annuity?

Buying an annuity at age 70 may bring a steady income, but the value depends on your lifespan and the annuity’s terms. The decision to buy an annuity at 70 is complex and hinges on an individual’s unique financial situation and retirement goals.

A financial advisor can talk you through a variety of retirement strategies, including buying an annuity.

Benefits of Buying an Annuity at Age 70 

The key advantage of purchasing an annuity at 70 is the guarantee of a steady income stream. An annuity provides regular payments and acts like an insurance policy, unaffected by market fluctuations. This guarantees financial certainty for many retirees. However, it’s essential to remember that the benefits can vary for each individual, as there is no one-size-fits-all solution in retirement planning.

Another exciting feature of annuities is tax-deferred growth. The money you put into an annuity grows without being taxed until you start receiving payments. Instead of approaching retirement in a high tax bracket, it becomes an advantageous tax shield. Although, this matters less once you reach age 70.

Moreover, several types of annuities can provide protection from volatile market changes, depending on its type. This security, combined with lifetime income, can be appealing during retirement — especially around age 70.

How Much Will an Annuity Pay at Age 70?

At 70, a $100,000 immediate annuity pays roughly $604–$721 per month for a male, depending on the payout option. A similar annuity pays between $605 to $689 for a female.

Higher contributions yield proportionally larger payouts. For example, a $500,000 annuity pays around $3,618 per month for a male with single life only, or $3,458 for a female. Choosing options a period certain or cash refund lowers monthly payment.

Overall, payments vary based on gender, annuity value and whether a guaranteed minimum payout period is included.

Disadvantages to Buying an Annuity at Age 70 

Conversely, potential downsides exist in buying an annuity at 70. A downside is missing out on key benefits like tax deferral or long-term payouts.

Another possible downside is high fees associated with some annuities that can gradually reduce your investment’s value. Think of management fees, risk charges and surrender fees as slow leaks that can empty your bucket over time. The fees you’ll pay will depend on the type of annuity you buy and the company you are working with.

Thirdly, consider the lack of liquidity of annuities. While you won’t have to worry about early withdrawal penalties, you typically can’t withdraw a lump sum after annuitization. It’s important that you’ll have enough money for other investments or things you may need. 

Should I Wait Until Age 75?

The age 75 rule is a general observation that its better to wait until age 75 to purchase an annuity. Since a 75-year-old has a shorter life expectancy than a 70-year-old, the monthly payments are higher.

Someone considering an annuity at 70 might wonder if waiting five more years is worth the potential increase. While payouts are typically higher at 75, deferring also means forgoing five years of guaranteed income. If steady income is needed sooner, or there’s concern about longevity, purchasing at 70 may be more practical.

On the other hand, if other retirement income streams are sufficient for now, waiting could yield better long-term value.

Types of Annuities to Buy 

Think of each annuity type as a different basket suited to a specific retirement need. The right one for you might be different from someone else and your age may or may not be a factor. Here are some of the most common types of annuities to consider.

• Immediate annuities: Begin paying out instantly after your initial investment and might be the right call for many people buying at the age of 70. This can be appealing to those who need an instant source of funds, which is likely you if you’re considering an annuity this late in life.
• Deferred annuities: Long-term investments in which you invest a sum of money, then receive payments several years down the line after the initial sum has accrued interest.
• Variable annuities: Allow you to invest your payments in different avenues akin to betting on several horses in a race. These annuities can offer growth potential but also carry more risk.
• Fixed annuities: Act like a timed-release pill, guaranteeing specific returns for a specified period and ensuring a stable and predictable income.
• Long-term care annuities: Like an emergency kit, can provide additional benefits if you fall seriously ill or become disabled, potentially covering some of the high costs associated with long-term care. This can be a great way to protect family members from the costs of anything that may happen to you.

How an Annuity Can Affect Your Social Security and RMDs

At age 70, most retirees are already receiving Social Security benefits and taking required minimum distributions from tax-deferred accounts like IRAs and 401(k)s. Purchasing an annuity adds another income stream to that mix, and the combined effect on your tax bill and benefit calculations deserves careful attention before committing to a purchase.

Annuity payments are taxed as ordinary income, which can raise your total income enough to increase the portion of Social Security benefits subject to federal tax. Depending on your combined income, between 50% and 85% of your Social Security benefit may become taxable. For retirees already drawing from retirement accounts, adding annuity income on top can push that threshold higher than anticipated.

Higher income from an annuity can also trigger increased Medicare premiums through income-related monthly adjustment amounts, known as IRMAA. These surcharges apply to Medicare Part B and Part D premiums and are based on income reported two years prior. A significant annuity payout in one year could result in higher Medicare costs two years later, a consequence that is easy to overlook during the purchase decision.

For retirees funding an annuity with IRA assets, the transaction may have implications for their required minimum distributions (RMDs). A qualified longevity annuity contract, or QLAC, is a specific product designed to work within IRA rules, allowing retirees to defer a portion of their RMDs until as late as age 85. This can reduce near-term taxable income while maintaining future income security.

The interaction between annuity income, Social Security, and RMDs is not straightforward, and the sequencing of withdrawals matters. A financial advisor or tax professional can help model how an annuity fits within your broader income picture before you commit to a purchase that is largely irreversible.

How a Financial Advisor Can Help a 70-Year-Old Buy an Annuity

At 70, the decision to buy an annuity carries a lot of complexity. A financial advisor can assess your complete income picture, including Social Security, RMDs, pensions, and savings, to determine whether an annuity fills a genuine gap or simply adds redundant income. That analysis alone can prevent a costly mistake.

Annuity products vary widely in structure, fees, and payout terms. A financial advisor can compare products across multiple carriers, identify hidden fees, and evaluate whether an immediate annuity, a QLAC, or another structure best fits your timeline and income needs at 70. Without that guidance, it is easy to choose a product based on the highest advertised payout rather than the one best suited to your situation.

Tax planning is particularly important. A financial advisor working alongside a CPA can model how annuity income will affect your Social Security taxation, Medicare premiums, and RMD obligations. Knowing the full after-tax value of an annuity payout, rather than the gross figure, gives you a more accurate comparison.

Longevity is a central variable in any annuity decision, and it is one that deserves honest analysis. A financial advisor can help you weigh your health, family history, and existing asset allocation to determine whether guaranteed lifetime income makes financial sense or whether other strategies might provide more flexibility. For retirees with significant health concerns, an annuity’s value proposition changes considerably.

An advisor also provides a check against common mistakes like locking up too much capital in a single product or making a hasty decision out of anxiety. A structured plan that accounts for liquidity needs, inflation, and legacy goals will almost always produce better outcomes than a product decision made in isolation.

Bottom Line

Deciding whether to buy an annuity at 70 means weighing guaranteed income and tax benefits against potential fees and liquidity limits. Consider other income sources like Social Security, pensions and retirement savings as part of the bigger picture. The right choice for you is going to depend on how your entire financial picture looks. 

Tips for Retirement Planning

• Planning out where your income is going to come from in retirement can be tough if you’re not an expert. Working with a professional like a financial advisor can help you assess your situation and make a plan to reach your goals. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now. 
• If you’re not sure whether you’ve saved enough for retirement, are on track, consider using SmartAsset’s free retirement calculator tool. 

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