Insights
Published August 24, 2026 by Harbor Point Advisors
"So what does a million actually throw off?"
He asked it the way people ask about the weather, and he had asked three other people before me. He had also gotten three different answers, which is why he was asking a fourth time.
It is a fair question and it deserves a straight number. The trouble is that the honest answer is not one number. It is three, they are not close together, and the differences between them are not really about math.
So let me give you all three, show you what each one costs, and then tell you the part that almost nobody says out loud.
When someone asks what a lump sum produces, they are actually asking two things at once, and the second one is doing most of the work.
The first is how much. That one is arithmetic.
The second is how sure. How certain is that number? Does it arrive whether or not the market cooperates? Does it stop if I live longer than expected? Can I change my mind?
Every approach below buys you a different mix of those two things. More certainty generally costs flexibility. More flexibility generally costs certainty. Nobody has found a way around that, and anyone selling you a way around it is selling you something.
Three common approaches, using round illustrative figures. These are examples to show the shape of the decision, not projections, and not a guarantee of any specific result. Your own numbers will differ.
The withdrawal approach. Leave the money invested and take a percentage each year. A commonly cited starting point is four percent, which on a million dollars is $40,000 a year, or about $3,300 a month. Your balance stays yours, it can grow, and you can stop or change the amount whenever you like. What you give up is certainty. In a bad stretch the same withdrawal is coming out of a smaller balance, which is the mechanism behind sequence of returns risk. Nobody guarantees this number, including the person who first suggested four percent.
The interest approach. Put the money somewhere that pays interest and live on the interest without touching principal. Bonds, Treasuries, CDs, a ladder of them. At an illustrative four and a half percent that is $45,000 a year, or about $3,750 a month, with the million still sitting there. What you give up is inflation protection and rate certainty. The income is only as good as prevailing rates when each piece matures, and the purchasing power of a fixed payment erodes over a long retirement.
The guaranteed income approach. Exchange some or all of the lump sum for a contractual stream of payments from an insurance company. The monthly figure here is typically the largest of the three, and I will use an illustrative $5,800 a month for a single life payout at around age seventy. What you give up is access. That money is committed. Any guarantee rests entirely on the claims-paying ability of the issuing insurance company, and contracts carry fees, surrender periods, and terms that vary widely.
This is the specific question people search for, so let me answer it directly and then complicate it honestly.
The direct answer is that it depends on more variables than most articles admit: your age, whether the payout covers one life or two, whether payments increase over time, whether there is a period certain or a refund feature, what kind of contract it is, and what rates are on the day you buy. Two people the same age can get quotes that differ meaningfully. The only number that means anything is a current quote for your actual age, and any article quoting a fixed figure, including this one, is showing you an illustration rather than an offer.
But here is the part that matters more than the number, and it is the thing my own industry is least eager to explain.
Look again at those three figures. $3,300, $3,750, and $5,800. The guaranteed option looks dramatically better. Almost twice the first one.
It is not really twice as good, and the reason is that you are not comparing the same thing.
The four percent withdrawal is earnings on your money while you keep your money. At the end you still have a balance, and your heirs get whatever is left.
The annuity payment is earnings plus your own principal handed back to you in installments. You gave them the million. A meaningful portion of every check is simply that million coming home.
Run it. A million dollars spread evenly across twenty years is $4,167 a month before any interest at all.
$4,167
So of that $5,800, something in the neighborhood of $4,167 is your own money and roughly $1,600 is what the insurance company is actually adding. Comparing a four percent withdrawal rate to a seven percent payout rate is comparing a yield to a yield plus a return of capital. They are different units. People do it constantly, including people who should know better, and it makes the annuity look like a miracle instead of a trade.
Now let me be equally fair in the other direction, because the trade is real and I am not talking you out of it.
That twenty-year arithmetic assumes the payments stop at twenty years. They do not. A lifetime payout keeps paying if you live to ninety-five, or a hundred, long after your own million has been fully returned to you and then some. That is the actual product being sold, and it is not principal return. It is protection against the one risk you cannot diversify away, which is living a long time.
The honest framing is this. You are not buying a higher return. You are buying the removal of a specific worry, paid for with liquidity and with whatever the balance would have left to your heirs. For some households that is an excellent trade. For others it is a poor one. It depends entirely on what else you have and what you are afraid of.
I am not going to tell you, because from here I cannot know, and anyone who tells you from a blog post is guessing.
But there are four questions that usually settle it, and you can answer them at your own kitchen table.
What are your fixed expenses? Not your total spending. The floor. Housing, insurance, food, utilities, healthcare. The number that has to arrive whether the market cooperates or not. Many people find it useful to cover that floor with something certain and leave the rest invested for growth and flexibility.
What else do you have? A million dollars is a very different decision for someone with a pension and Social Security covering most of their expenses than for someone where this is the whole plan.
How much liquidity do you need to sleep? Some people are genuinely fine committing money they cannot get back. Others discover, six months later, that they hate it. That is not irrational and it is worth knowing about yourself before you sign rather than after.
What do you want left over? If leaving something to children or a spouse matters to you, that belongs in the arithmetic from the beginning, not as an afterthought.
It is also worth saying that this is rarely all or nothing. Covering a portion of the floor with guaranteed income and leaving the remainder invested is a common structure, and it sidesteps the false choice the three-column comparison implies.
If this money arrived recently from a business sale or another liquidity event, the strongest advice I have is to slow down. The first ninety days are the worst possible time to commit a large sum permanently, and I wrote separately about what actually needs deciding in that window and what does not.
And if you conclude after all this that you would rather keep the money invested, stay liquid, and accept the variability, that is a legitimate answer. Plenty of people should. I would rather you reach it deliberately than have someone talk you into a contract you do not understand.
If you want to see the three columns with your actual number, your actual age, and a real quote instead of an illustration, that is a conversation and not a commitment. There is more on how the income side fits together on our retirement income planning page whenever you are ready.
No pressure, no obligation, just clarity.
This article is provided for educational purposes only and does not constitute tax, legal, or investment advice. All dollar figures shown are hypothetical illustrations used to demonstrate a concept. They are not projections, quotes, offers, or guarantees of any specific result, and they do not reflect the performance of any particular product. Actual annuity payout amounts depend on age, gender, contract type, payout election, features selected, the issuing company, and rates in effect on the date of purchase; only a current quote reflects what is available to you. Withdrawal rates and interest rates shown are illustrative and are not guaranteed. Product guarantees are subject to the claims-paying ability of the issuing insurance company. Insurance and annuity products are subject to underwriting, fees, charges, surrender periods, and limitations described in the policy or contract; read them before purchasing. Tax rules reflect current federal law and are subject to change; consult your own tax professional regarding your specific situation. Adam Stevens is a licensed insurance professional. Harbor Point Advisors.
Harbor Point Advisors. Bozeman, Montana. (406) 539-3423. Serving clients nationwide.
Harbor Point Advisors is an insurance agency. Adam Stevens is a licensed insurance professional, license number 3004330767, NPN 22297129. Not a registered investment adviser or broker-dealer.
This article is educational and is not individualized investment, tax, or legal advice.