Dividends vs. an Annuity: Which Turns $840,000 Into More Monthly Income for Life?

A single-premium immediate annuity provides a fixed monthly payout for life, using the entire $840,000 investment. For a 65-year-old, this could be $5,250 to $5,600 per month. The principal is lost, and payments do not grow with inflation.

Dividend portfolios generate variable monthly income based on the choice of dividend-paying stocks, preserving the initial capital. A moderate approach yields roughly $3,850 per month, growing with dividend increases. Principal remains intact, passing to heirs. Dividend growth eventually surpasses flat annuities in 12-15 years.

A hybrid strategy combines a smaller immediate annuity for essential costs with a larger dividend portfolio. For example, $300,000 in an immediate annuity provides a $1,900-$2,000 monthly floor, while the remaining $540,000 generates growing income for heirs. This balances longevity risk reduction with capital preservation and growth.