This paper presents new evidence on the expected present discounted value of payouts on individual life annuities. The annuity examined is the single premium immediate life annuity, which pays a fixed amount as long as the insured lives in exchange for a lump-sum premium. The study finds that individual annuities are currently priced so that retirees without bequest motives should find these policies valuable in smoothing retirement consumption. The expected present discounted value of payouts relative to the initial cost has increased over the last decade, suggesting lower transaction costs for participating in the individual annuity market. The authors analyze data on annuity prices and payouts from 1985, 1990, and 1995. They find significant variation in annuity payouts across insurers, with the difference between the ten highest and lowest payout companies being close to 20%. The expected present discounted value of annuity payments per premium dollar is well below unity, indicating that retirees face a significant "transaction cost" when purchasing individual annuities. For a 65-year-old, the present value of payouts is about 80-85 cents per dollar of premiums, with the remaining premium covering marketing costs, corporate overhead, taxes, and profits. The study also finds that the value per premium dollar generally declines with age and is typically higher for annuities issued to women and joint-and-survivor annuities than for those issued to men. The value per premium dollar has increased by about 13 percentage points over the last decade and a half, suggesting lower transaction costs. Incorporating tax liabilities does not significantly affect the expected present discounted value of annuity payouts. The paper concludes that individual annuities are a valuable tool for retirees to smooth consumption, and that the market for individual annuities has grown significantly. The findings suggest that the effective transaction costs to participating in the individual annuity market have declined, and that the market may play a greater role in individual retirement preparation as public and private pension systems emphasize individual choice and self-reliance.This paper presents new evidence on the expected present discounted value of payouts on individual life annuities. The annuity examined is the single premium immediate life annuity, which pays a fixed amount as long as the insured lives in exchange for a lump-sum premium. The study finds that individual annuities are currently priced so that retirees without bequest motives should find these policies valuable in smoothing retirement consumption. The expected present discounted value of payouts relative to the initial cost has increased over the last decade, suggesting lower transaction costs for participating in the individual annuity market. The authors analyze data on annuity prices and payouts from 1985, 1990, and 1995. They find significant variation in annuity payouts across insurers, with the difference between the ten highest and lowest payout companies being close to 20%. The expected present discounted value of annuity payments per premium dollar is well below unity, indicating that retirees face a significant "transaction cost" when purchasing individual annuities. For a 65-year-old, the present value of payouts is about 80-85 cents per dollar of premiums, with the remaining premium covering marketing costs, corporate overhead, taxes, and profits. The study also finds that the value per premium dollar generally declines with age and is typically higher for annuities issued to women and joint-and-survivor annuities than for those issued to men. The value per premium dollar has increased by about 13 percentage points over the last decade and a half, suggesting lower transaction costs. Incorporating tax liabilities does not significantly affect the expected present discounted value of annuity payouts. The paper concludes that individual annuities are a valuable tool for retirees to smooth consumption, and that the market for individual annuities has grown significantly. The findings suggest that the effective transaction costs to participating in the individual annuity market have declined, and that the market may play a greater role in individual retirement preparation as public and private pension systems emphasize individual choice and self-reliance.