Annuity Payouts and Payment Types

During the annuitization phase, annuity premiums are converted into a stream of periodic payments. There are several ways to receive these payouts from the insurance company. The best option for you depends on your current financial needs and future retirement goals.

When Do Annuity Payments Start?

When you purchase an annuity, you must decide when you want payments from the insurance company to begin.

Like so many aspects of your annuity contract, you have options.

Do you want payouts to begin right away? An immediate annuity might work for you.

Or, do you want your money to grow tax-deferred over time before retirement? In that case, a deferred annuity may better suit your needs.

Immediate vs. Deferred Annuities
Annuity Payout TypePayments BeginPotential Buyers
ImmediateWithin a year after purchasePeople who plan to retire soon can use it to supplement income.
DeferredA time in the future, such as retirementPeople who want to grow money tax-deferred for use in retirement.

Period Certain vs. Guaranteed Lifetime Payments

After selecting either a deferred or immediate annuity, you must consider how long you wish to receive payouts from the insurer.

Annuities can provide guaranteed income for life — or for a certain period of time. They may also offer money to your beneficiary after you die.

Two popular payout options are life and period certain.

Financial expert John Clark explains the different types of annuity payouts.

Guaranteed Lifetime Payments

Life annuities, as the name implies, pay out for the rest of your life. They may also be called single life, life only or straight life.

This option helps protect against longevity risk, or the threat of outliving your money in retirement.

This protection is increasingly relevant as a growing number of Americans report inadequate retirement savings.

According to Northwestern Mutual’s 2020 Planning & Progress Study, 22 percent of Americans have less than $5,000 saved for retirement — and 36 percent of respondents said they don’t know how much they have saved.

The amount of a life annuity payout is determined by how much you invest and your life expectancy.

Life annuities do not guarantee money for your heirs or spouse after you pass away.

Period Certain

Period certain annuities only guarantee payments for a specific amount of time. It’s like term life insurance, which only provides coverage for a set number of years.

If you die before the end of your contract period, your beneficiary receives the rest of your payments for the remaining period.

Period certain annuities do not hedge against longevity risk.

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Our financial experts can guide you through the annuity buying process so you can focus on your retirement, asset protection or income generation.

Other Annuity Payout Options

Life and period certain are popular annuity payout options, but other methods exist that may better suit your needs.

Life with Period Certain

Life with period certain is a hybrid annuity payout option. It guarantees payments for life while also ensuring that your beneficiary receives the rest of your annuity payments if you pass away during a certain time.

For example, let’s say you purchase a life annuity with a 10-year period certain.

If you pass away after three years, there’s still seven more years of contractual payments to your beneficiary. But if you die after 11 years, your beneficiary won’t receive any annuity money.

Lump-Sum Payment

Instead of spreading out payments over time, you can choose to receive a one-time lump-sum payout from the annuity provider.

This option may sound appealing, but it carries major tax consequences. Receiving all the money at once requires you to pay income tax on the entire sum when tax season arrives.

Systematic Withdrawals (Fixed Amount)

This option allows you to choose the dollar amount of payouts along with how many payments you want to receive.

However, systematic withdrawals do not guarantee income for life. How long payments last depends on the amount of money in your annuity account.


Joint and survivor annuities payout to your beneficiary for the rest of his or her life after you die. This option is popular with married couples.

Payments are calculated on the life expectancy of both you and your survivor. This reduces the amount of each payment you receive.

Life Expectancy Calculator Mockup Calculate Your Life Expectancy
Life expectancy is a key factor in determining how much money you will need in retirement. Use our calculator to estimate how long you will live.

Choosing the Right Payout on Your Annuity

Purchasing an annuity is a big decision. Consider your priorities, the amount of money you need each month in retirement and how long you want payments to last.

You should also determine if it’s important for a beneficiary to receive money from the annuity if you unexpectedly pass away.

Annuities are complex insurance products. It’s best to speak with a professional financial advisor first. An experienced advisor can give you guidance on the costs and benefits of purchasing an annuity.

Last Modified: October 5, 2021

6 Cited Research Articles

  1. Martin, E. (2019, June 26). Here’s how much Americans have saved for retirement. Retrieved from
  2. Northwestern Mutual. (2020). 2020 Planning & Progress Study. Retrieved from
  3. Lankford, K. (2018, July 11). A Tax-Friendly Way to Get Income for Life. Retrieved from
  4. Updegrave, W. (2018, May 2). One way to get retirement income for the rest of your life. Retrieved from
  5. CNN Money. (n.d.). What payout options do I have? Retrieved from
  6. Financial Industry Regulatory Authority. (n.d.). Selecting Retirement Payout Methods. Retrieved from