COMPARISON · MONEY · RETIREMENT
$100,000 at age 65. A single-premium immediate annuity pays $700 a month — $8,400 a year, guaranteed for life (top carrier quote, October 2026: an 8.40% payout rate). A self-built 10-rung Treasury ladder blending ≈4.8% pays $6,953.69 a year ($579.47 a month) for 25 years — then the money is gone. The annuity wins by $1,446.31 a year for every year you are alive. The gap has a name — mortality credits — and a price: the ladder keeps your liquidity and your legacy. Run the four scenarios below.
Enter the premium, your age, the annuitant type, and your SPIA quote. The calculator annualizes the SPIA check, prices a self-amortizing bond ladder at your yield and horizon with the PMT formula, and names the winner — plus what the SPIA check buys after 20 and 25 years of inflation. Then switch the scenario: age 70, joint life, or a 4.2% CD ladder.
Guarantee vs control, priced in dollars. The SPIA converts $100,000 into $8,400 a year for life — you cannot outlive it, and you cannot get the $100,000 back. The Treasury ladder converts the same $100,000 into $6,953.69 a year for 25 years — you keep the principal, the leftover bonds pass to your heirs, and when rates move you rebuild the ladder at the new yield. The annuity’s $1,446.31-a-year edge comes from mortality credits: annuitants who die early subsidize the checks of those who live long — an edge no bond portfolio can copy. The ladder’s edge is everything the annuity gives up: liquidity, legacy, and inflation resets. Default check: $8,400 − $6,953.69 = $1,446.31 to the SPIA, every year you are alive.
Setup: $100,000 premium, age 65, single male, a 10-rung Treasury ladder blending ≈4.8% over 25 years, inflation 3%.
Line 1 — the SPIA. $700 × 12 = $8,400/yr, guaranteed for life. Payout rate: $8,400 ÷ $100,000 = 8.40% — and that is an income rate, not a return: part of every check is your own principal coming back. The insurer invests in conservative bonds; the extra juice is mortality credits.
Line 2 — the ladder. PMT(4.8%, 25, $100,000) = $6,953.69/yr ($579.47/mo) — the equal annual draw that exactly empties the ladder at year 25. Total paid out: $173,842.26; left for heirs if you die early: whatever bonds remain.
Line 3 — the verdict. $8,400.00 − $6,953.69 = the SPIA wins by $1,446.31/yr while you are alive. It also pays the premium back to you in 11.9 years — live past 77 and the checks are pure longevity insurance.
Branch — age 70 (SPIA $771/mo, 20-year ladder): the quote rises to $9,252/yr (9.25%) because the insurer expects fewer checks; the 20-year ladder at 4.8% pays $7,888.75/yr ($657.40/mo). The SPIA wins by $1,363.25/yr. Waiting to 70 is the cheapest way to buy a bigger check — if your health cooperates.
Branch — joint life, both 65 ($622/mo): the check falls to $7,464/yr (7.46%) because the guarantee now covers two lives. Against the same 25-year ladder ($6,953.69), the SPIA wins by $510.31/yr — the survivor benefit costs about $936/yr versus the single-life quote.
Branch — CD ladder at 4.2%: a top 1-year CD ladder pays only $6,537.22/yr ($544.77/mo) over 25 years. The SPIA wins by $1,862.78/yr — the annuity’s edge grows whenever the alternative yield shrinks.
Branch — the inflation view (3%): the SPIA’s $8,400 buys $4,650.88/yr in today’s dollars after 20 years and $4,011.89 after 25. The ladder can be rebuilt at higher rates as old rungs mature; the fixed SPIA check cannot. This is the annuity’s real tax — not paid to the IRS, paid to time.
Branch — the error case: set the age to 54 and the calculator refuses — quote data thins below 55 (and above 90). Set the ladder yield to 16% and it refuses that too. Leave the annuitant on “— Choose —” and it asks you to pick one, because the quote depends on it.
| Output | Formula | What it means |
|---|---|---|
| SPIA annual income | monthly payout × 12 | $8,400 at the defaults — guaranteed for life, no matter how long you live. |
| SPIA payout rate | annual income ÷ premium | 8.40% at the defaults — an income rate, not a yield: it includes return of your own principal. |
| Ladder annual income | PMT(yield, years, premium) | $6,953.69 for 25 yr at 4.8% — the equal draw that exactly empties the ladder; year 26 pays $0. |
| Winner’s edge | | SPIA annual − ladder annual | | $1,446.31/yr to the SPIA at the defaults — every year you are alive. |
| Real-dollar SPIA check | nominal ÷ 1.03t | $4,650.88 after 20 yr, $4,011.89 after 25 yr at 3% inflation — the annuity’s inflation tax. |
SPIA quotes are snapshots from October 2026 — they move with interest rates and vary by carrier, state, and the day you lock (the carrier spread runs about 17% on the same contract; get competing quotes). The two quote sources use different bases: LifeAnnuities.us figures are single life with a 5-year period certain; the $700/$771/$622 figures are top-carrier life-only quotes — mixing the bases is why different pages show different “65-year-old man” numbers. The ladder assumes a constant 4.8% reinvestment for the full horizon, ignores taxes, trading costs, and the bid-ask on odd lots, and pays in equal annual draws (real ladders pay coupons plus maturing principal). Neither leg is inflation-protected; inflation riders exist but cut the starting check 20–30%. This is educational math, not retirement or tax advice — annuity contracts are irrevocable, so model before you sign.
Bright Side Kit. "Annuity vs Bond Ladder: Who Wins in 2026 | Bright Side Kit." https://brightoolbox.com/annuity-vs-bond-ladder/ Accessed October 24, 2026.Data sourcesNo — and the difference is the whole decision. The 8.40% is an income rate: $8,400 a year on $100,000. But part of every check is your own principal coming back — over 11.9 years the SPIA has simply handed you your $100,000 back, one $700 check at a time. The insurer’s actual investment return is near bond yields; the extra over bonds is mortality credits, not magic. Compare the payout rate to a bond yield and you will always pick the annuity; compare it to a bond ladder’s $6,953.69/yr draw and you are comparing like with like.
The annuity’s unique edge. A SPIA pools your premium with thousands of other buyers. Annuitants who die earlier than expected leave unspent premium in the pool, and the insurer uses it to subsidize the checks of those who live longer. That transfer — from the early-deceased to the long-lived — is why a 65-year-old man gets $8,400/yr from the insurer while his own bonds could only safely pay $6,953.69/yr. No bond, CD, or ladder can copy it, because no bond buyer dies into the pool.
They live in different tax worlds. With a non-qualified SPIA (after-tax money), the IRS applies an exclusion ratio: part of each check is a tax-free return of your own principal until your life expectancy, and only the interest slice is taxed — after life expectancy the checks are fully taxable. Fund it from an IRA and 100% of each check is ordinary income. The Treasury ladder’s interest is federal ordinary income but state-tax-exempt. Neither is a free lunch; run your bracket through both before you decide which tax shape you prefer.
SPIAs are not FDIC-insured. They are backed by state guaranty associations, which typically cover around $250,000 in present value of annuity benefits — the cap varies by state, some reach $500,000. Above the cap, split the premium across two or three A-rated carriers to stay inside the limits. This is the one risk the bond ladder never has: Treasuries are backed by the U.S. government itself.
Generally no. Once the free-look window (10–30 days) closes, the decision is irrevocable — unlike a CD, you cannot cash out a SPIA. That is why the calculator’s inflation branch matters: the $100,000 is gone as capital. If the idea of zero access terrifies you, add a period-certain option (life + 10 years runs about $674/mo top end vs $700 life-only) or a cash-refund option so heirs recover unspent premium — both shave the check, both buy back a little control.
Almost never all of it. The standard playbook: annuitize enough to cover non-negotiable spending (the gap Social Security and any pension leave), and keep the rest liquid and invested for emergencies, inflation, and legacy. Many retirees split it — 40–50% into the SPIA for the guaranteed floor, the rest into a bond ladder for flexibility. That hybrid is the most common answer in the planner community, and this calculator’s two legs are exactly the two halves of it.
The SPIA, by a landslide. Thirty years of $8,400 = $252,000 paid out, still going. The 25-year ladder paid $173,842.26 total and has been empty for five years — you are spending other money now. This is longevity insurance working as designed: the longer you live, the better the annuity looks, because every check past year 25 is money the ladder could never have paid. Die at 70 and the math reverses — the ladder’s leftover bonds went to your heirs, and the SPIA (life-only) paid just five years.
Yes — it is the cheapest raise in retirement. The top quote moves from $700/mo at 65 (8.40%) to $771/mo at 70 (9.25%), about a 10% raise for five years of patience, because the insurer expects to write fewer checks. Against the 20-year ladder ($7,888.75/yr) the age-70 SPIA still wins by $1,363.25/yr. The catch is health: the raise only pays if you live long enough to collect it.