Life-onlyLife-only provides you with regular, guaranteed income payments from your annuity for life. By converting the contract value of your annuity, you essentially eliminate the risk that this income source will run out before you die.
Joint and survivorJoint and survivor life ensures the retirement income provided by your annuity will continue for your spouse when you die. However, payments are calculated and based on the life expectancy of both you and your spouse, making payments for the joint-life option lower than with the life-only option.
Fixed periodFixed period (or period certain) is an option that allows you to select a specific time period for which your annuity payments will last. Because you won't be receiving payments for life (as with the life option), payments are higher, but you run the risk that your annuity payments will run out before you die. For example, if you're age 65 and select 15-year period certain payout, your annuity contract will guarantee payments until you reach age 80. So if you live longer than 80 and don't have any other source of retirement income, you might find this option too risky.
Life with period certainLife with period certain (or guaranteed term) provides you with guaranteed income for life (just like the life option), but also allows you to select a specific time period for which your annuity must pay your designated contingent payee even if you die before that guaranteed period ends. While this option provides you with income for life, payments are generally smaller than they would be under the life-only payout.
Fixed amountFixed amount (or systematic withdrawal schedule) allows you to select the amount of the payment you want to receive each month. The payments continue until the total accumulated value has been paid out. The duration of payments will depend both on the amount chosen and the annuity's accumulated value at the time of annuitization. For this reason, the insurance company cannot guarantee that you will not outlive your income payments.
Lump-sum payment allows you to receive your annuity payout in one lump sum. However, in the year you take the lump sum you'll have to pay income taxes on the entire investment-gain portion of your annuity. For some qualified accounts the entire sum may be taxable. Be sure to consult a qualified tax professional or financial advisor before taking a lump sum from an annuity.
Selecting the best annuitization payout for your annuity can be confusing. Begin by deciding on the amount you will need each month to live on or to supplement your retirement and how long you think you'll need to receive payments; then meet with a qualified insurance agent or financial planner to determine the option that's best for you.
*Not all annuities provide these options, and some may offer different payouts. All guarantees are subject to the claims-paying ability of the issuing insurance company.