What Is the Minimum Annuity Investment You Can Make?

Annuities offer a reliable income stream for retirees. But if you’re wondering how much it takes to buy an annuity, the minimum investment required can vary. Generally, the initial investment for an annuity starts around $5,000 to $10,000, depending on the type of annuity and the provider. Fixed annuities often have lower minimums compared to variable annuities, which may require higher initial investments due to their potential for greater returns. As you’re beginning your retirement planning, it can be helpful to understand these minimum requirements.

Consulting with a financial advisor can also provide clarity on how to integrate annuities into a broader retirement strategy, maximizing both your security and your growth potential.

What Is an Annuity?

Annuities are financial products designed to provide a steady income stream, typically used as part of a retirement planning strategy. When you purchase an annuity, you enter into a contract with an insurance company. You make either a lump-sum payment or a series of payments, and in return, the insurer agrees to make periodic payments to you at a future date, often during retirement.

How Much You Need to Buy Different Types of Annuities

A couple discusses how much they need to buy an annuity as part of their retirement plan.

Curious about annuities but concerned about the initial investment required? You’re not alone. Many potential investors wonder about the minimum annuity investment they can make when exploring this financial option. Annuities, financial products that provide regular income payments, come in various forms with different entry points. Let’s review five types of annuities available, as well as how much you need to buy an annuity of each type.

1. Fixed Annuities

Fixed annuities typically have lower minimum investment requirements compared to other types of annuities. The minimum investment for a fixed annuity usually starts around $5,000 to $10,000. This type of annuity provides a guaranteed rate of return, making it a safer and more predictable option for conservative investors.

2. Variable Annuities

Variable annuities generally require a higher initial investment due to their potential for greater returns linked to market performance. The minimum investment for variable annuities often starts at $10,000 to $25,000. These annuities allow you to invest in a variety of sub-accounts, similar to mutual funds, offering the possibility of higher growth. But along with that, higher growth comes increased risk.

3. Indexed Annuities

Indexed annuities, which tie returns to a specific market index like the S&P 500, usually have a minimum investment that falls between fixed and variable annuities. The typical minimum investment for an indexed annuity ranges from $5,000 to $25,000. This type of annuity offers a balance between the security of fixed annuities and the growth potential of variable annuities, providing a middle ground for investors.

4. Immediate Annuities

Immediate annuities, which are designed to start making payments almost immediately after a lump-sum investment is made, generally have a minimum requirement similar to that of fixed annuities. The minimum investment for an immediate annuity usually starts around $5,000 to $10,000. This type of annuity is ideal for those who need a steady income stream right away, such as retirees looking to supplement their retirement income.

5. Deferred Annuities

Deferred annuities, which start payments at a future date, often have a flexible minimum investment requirement depending on the insurance provider and the terms of the contract. Generally, the minimum investment for a deferred annuity ranges from $5,000 to $10,000. These annuities allow your investment to grow tax-deferred until you begin receiving payments, making them suitable for long-term retirement planning.

How To Choose Between Types of Annuities

When deciding how to choose between types of annuities, start by clarifying your financial objectives. Are you primarily seeking guaranteed income in retirement, tax-deferred growth or protection against market downturns? Your specific goals will naturally guide you toward certain annuity types that align with your needs. Consider your time horizon and when you’ll need to access the funds, as this will influence whether an immediate or deferred annuity makes more sense.

Fixed annuities offer predictable, guaranteed returns and are ideal for conservative investors seeking stability. These products provide peace of mind through consistent interest rates and principal protection. Variable annuities, meanwhile, allow for potentially higher returns through market-linked investment options, but come with greater risk and typically higher fees. Your risk tolerance and desire for growth versus security should guide this fundamental choice.

Annuity costs vary dramatically between products and can significantly impact returns. Variable annuities typically carry the highest fees, including mortality and expense charges, administrative fees and underlying fund expenses. Fixed annuities generally have lower explicit costs but may offer lower returns. Always request a complete fee disclosure and understand how expenses will affect your long-term results.

Bottom Line

When considering how much you need to buy an annuity, it's important to evaluate your financial situation and retirement goals.

When considering what is the minimum annuity investment you can make, it’s important to recognize that requirements vary significantly across providers. Before committing to any annuity, carefully research different providers to find one that matches your financial situation. Remember that while lower minimums may seem appealing, they should be weighed against other important factors like fees, interest rates and contract terms.

Annuity Investment Tips

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.
An annuity may help you diversify your portfolio. Consider your risk tolerance and all of the various types of investments that can help your money grow. From stocks and bonds to mutual funds and exchange-traded funds (ETFs), there are many investments to consider outside of annuities.