Receiving Income

The annuity owner selects how he or she or a beneficiary receives income and the timing of the payouts. For example, you can include your spouse in your payout plan, which would guarantee payments to him or her after your death. Careful consideration should be given to this and other payout options since the options you choose will influence the amount you receive. Some common forms of payout include:

Life income: The annuity pays income as long as you live, even if payments exceed the amount of money you put into the annuity. When you die, no further payments are made to anyone. This payout option, also referred to as a straight-life option, usually provides the highest income payment.

Joint and survivor life income: The annuity pays income for as long as you or a joint annuitant live. Because the survivor feature is an added benefit, the payments to you will be less than with a straight-life option.

Life income with refund: The annuity pays income to you for life and, if you die before receiving the amount you contributed, your beneficiary is entitled to the amount of contributions not yet received. Some policies pay the beneficiary a lump sum; others require the beneficiary to receive the money in installments.

Life income with period certain: The annuity pays income to you for as long as you live with the guarantee that, if you die within a certain period after you start receiving income (usually 10 or 20 years), your beneficiary will receive regular payments for the rest of that period.

Other income options are available. An annuity can pay you in a series of payments for a specified number of years or, if you have a deferred annuity, a lump sum. These options do not include a lifetime guarantee.

Many deferred annuities allow you to take money out during the accumulation phase through periodic or systematic withdrawals although there is usually a limit on the amount you can withdraw each year.