In today's volatile financial landscape, retirement planning has become even more challenging. Stock market volatility, inflation concerns and lingering economic uncertainty have left many Americans wondering if their retirement savings will truly last as long as they need it to. According to , 64% of Americans say they fear running out of money before they die and 62% say they aren't saving as much for retirement as they'd like. Another 54% say inflation is contributing to their fear of running out of money during retirement.

Those types of fears are helping to drive interest in guaranteed retirement income streams. And, as traditional pension plans continue to disappear from the private sector, soon-to-be retirees and those planning for retirement are increasingly responsible for creating their own retirement security. In turn, unique products like annuities, which are financial products that convert a lump sum of money into monthly payments, have emerged as a potential solution for those seeking predictable income during retirement.

With interest rates remaining stabilized at higher levels, annuity payouts have also become more attractive. This has prompted many pre-retirees and retirees to consider allocating a portion of their portfolio to an annuity. But how much could you actually receive from a modest $25,000 annuity investment, and would it be worth it? That's what we'll examine here.

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How much will a $25,000 annuity pay monthly?

The monthly payout from a $25,000 annuity varies significantly based on several factors, with age and gender being among the most influential. For immediate annuities, though, which offer payments that start right away, shows that you can expect the following monthly payments from that type of investment:

• Men age 62: $104.74 per month
• Women age 62: $92.72 per month
• Men age 67: $125.95 per month
• Women age 67: $110.75 per month
• Men age 70: $142.58 per month
• Women age 70: $125.26 per month
• Men age 72: $155.39 per month
• Women age 72: $136.55 per month
• Men age 75: $180.58 per month
• Women age 75: $157.58 per month

The difference in payouts between men and women reflects life expectancy calculations. Since women typically live longer than men, their monthly payments are lower to account for the extended payment period. However, the type of annuity you choose can also dramatically impact these figures. Other common options include:

Deferred annuities: These types of annuities delay payments until a future date, potentially increasing your monthly income. 

Fixed and variable annuities: Fixed annuities provide guaranteed payment amounts, while variable annuities tie payments to investment performance, introducing both upside potential and downside risk. The latter typically have higher fees but might offer inflation protection through growth.

Indexed annuities: These types of annuities link returns to market indexes with caps on potential gains and floors protecting against losses. They typically pay less than fixed annuities initially but may provide some inflation protection.

And, the additional factors and options that could impact the payouts on a $25,000 annuity include:

Period certain guarantees: These guarantees ensure payments continue for a minimum period (e.g., 10 years) even if you die earlier, but reduce monthly payments.

Joint and survivor benefits: These benefits continue payments to a spouse after your death, but can reduce initial monthly payments compared to single-life options.

Cost-of-living adjustments (COLA): These adjustments increase payments annually to combat inflation but typically reduce the initial payments.

Liquidity options: The annuity options that offer more liquidity allow access to your principal in emergencies but may reduce your monthly payments.

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Is a $25,000 annuity worth it?

Monthly payments of between $100 to $180 per month don't necessarily sound like a windfall, and that's especially true when you consider that you're giving up access to that $25,000 in exchange. So, is buying a $25,000 annuity really worth it? The short answer is that it depends on your goals.

If you're looking for a safe, supplemental income stream, a small annuity could play a helpful supporting role in your retirement plan. That $100 or $150 a month could help cover utility bills, prescriptions or groceries, and the income is guaranteed, no matter how long you live or how the markets perform.

However, if flexibility or growth potential is more important to you, an annuity might not be the best use of a smaller sum like $25,000. Once the money is invested, it's no longer liquid. That means you generally can't access it for emergencies without facing penalties or fees, especially with immediate or deferred annuities. And if you're relatively young and still have time to invest, you might earn a better return by putting that money into a diversified investment portfolio instead.

When you run the math, a $25,000 annuity often won't keep pace with inflation unless you add riders, either, further reducing the monthly benefit. So, for many retirees, a more substantial annuity investment would be needed to meaningfully impact their retirement security. However, a smaller $25,000 annuity might serve as one component of a diversified retirement income strategy, particularly for covering specific fixed expenses.

The bottom line

A $25,000 annuity won't transform your retirement, but it can offer a small, steady stream of income that adds a layer of security to your overall financial picture. In today's uncertain economy, that predictability can be valuable. But like any financial product, annuities aren't the right option for everyone. Whether a $25,000 annuity is worth it comes down to your unique needs, your tolerance for risk and how that income would fit into your broader retirement plan. So, before you invest, be sure to weigh the pros and cons, explore different types of annuities and make sure your money is working for you in the most effective way possible.