Straight Life Annuity

A straight life annuity will guarantee you a stream of payments throughout your life, but those payments end upon death. There is typically no death benefit or continued payments for any heirs. Straight life annuities may not be the best option for people who hope to financially support their families after they die.

What Is a Straight Life Annuity?

Like other annuities, a straight life annuity guarantees a stream of income for a set amount of time. What makes a straight life annuity stand apart is that it pays out only while the annuity holder is alive. This can result in higher payments than other types of annuities since it is expected to pay out over a shorter period.

Straight Life Annuity Pros
  • Higher payments since payout doesn’t last past annuity holder’s life
  • Good way to cash in for people who don’t have a family or heirs
Straight Life Annuity Cons
  • No payments or benefits for any surviving family
  • Risk of losing most of your money if you die early

While payments can be bigger, there is also a higher risk of losing your investment if you die shortly after purchasing your annuity since payments will not continue past your death. This option also may not be viable if you intend to provide financial security to others following your death. A straight life annuity is essentially a line of payments for you and only you.

Straight Life Annuity Payout Options

As with other forms of annuities, straight life annuities can be available in several different forms that come with differing payout options.

Types of Straight Life Annuities
Straight Life Immediate Annuity
In this type, you start to receive your stream of payments quickly after purchasing the annuity, typically due to a large investment.
Straight Life Fixed Annuity
The interest rate for your annuity will be set, making this a more stable option.
Straight Life Fixed Index Annuity
This type of annuity is fixed to a specific index, like the Nasdaq.
Straight Life Variable Annuity
This annuity option is tied to an investment portfolio.

Different types of straight life annuities come with differing levels of risk and potential payouts. The best option for you can vary depending on your circumstances.

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Good Candidates for a Straight Life Annuity

If you have no financial responsibilities to others, then a straight life annuity could be a solid option for you. The greatest downside to this type of annuity is that it typically doesn’t provide any financial benefit or security to others. Once you die, the payments stop.

Because of this, you should also be conscious about your expected life span. Since the payments stop upon your death, you risk losing most of your investment if you purchase a straight life annuity and die shortly after your payments begin.

Straight Life Annuity Alternatives

For many people, straight life annuities may not be a viable option. If you have family or heirs that you are financially responsible for, then other types of annuities may make more sense.

The joint or survivor annuity can be a good option for couples. This type of annuity provides security for you and your spouse by distributing payments to the surviving annuitant after the other passes away.

Another option could be a period certain annuity. While a straight life annuity is tied to your lifespan, period certain annuities pay out over a set amount of time, regardless of how long you live. If you die before the period of payments ends, the remaining payments can be transferred to a spouse, family member or other beneficiary.

Last Modified: December 17, 2021

3 Cited Research Articles

  1. U.S. Bureau of Labor Statistics. (2016, June). You’re Getting a Pension: What Are Your Payment Options? Retrieved from https://www.bls.gov/opub/btn/volume-5/youre-getting-a-pension-what-are-your-payment-options.htm
  2. Arizona State Retirement System. (n.d.). Retirement Annuity Options. Retrieved from https://www.azasrs.gov/content/retirement-annuity-options
  3. Pension Benefit Guarantee Corporation. (n.d.) Your Benefit, Your Choice. Retrieved from https://www.pbgc.gov/sites/default/files/yourbenefityourchoice.pdf