What income payment options come with a deferred annuity?

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A fixed deferred annuity can usually be paid out as a lump sum or as income payments, and the contract may offer several income payment options. Common choices include payments for your lifetime, for your lifetime with a guaranteed period, or for as long as either you or another person lives. One of the main benefits of a deferred annuity is that the value built up during the accumulation period can later be used during the payout period. Income payments are usually made monthly, although you may be able to choose less frequent payments. The amount of those payments is based on the accumulated value in the annuity and the annuity’s benefit rate in effect when payments start. The benefit rate usually depends on your age and sex, and on the payment option you choose. Each contract includes guaranteed benefit rates, and many companies also have current benefit rates. The company can change current rates, but they can never be lower than the guaranteed benefit rates. When income payments begin, the insurance company generally uses the benefit rate in effect at that time to calculate your payment amount. A life only option pays income for your lifetime and stops when you die. Because no payments continue to anyone else, this option usually provides the highest income. A life annuity with period certain pays income for as long as you live and also guarantees payments for a set number of years, often 10 or 20 years. If you die during that guaranteed period, your beneficiary receives the remaining payments for the rest of that period. Because this added guarantee provides extra protection, each payment is smaller than under a life only option. A joint and survivor option pays income as long as either you or your beneficiary lives. You may be able to choose a reduced payment after the first death, and you may also be able to choose payments for a set length of time. Because the survivor feature adds value, payments are generally smaller than with a life only option. The 2022 NAIC guide also describes payout choices in general terms as payments for your lifetime, for the longer of your lifetime or your spouse’s lifetime, for a set time period, or for the longer of your lifetime or a set time period. It is important to understand that once you annuitize and income payments begin, you generally cannot take any other money out of the annuity, and you usually cannot change the amount of your payments. If you die before the payment period ends, whether your survivors receive anything depends on the payout option you chose.