Choosing the annuity income option that’s right for you begins with answering a few questions. You’ll need to consider how long you’ll need the income and whether or not you’ll need to provide income to another individual such as a spouse or beneficiary.

Generally, all lifetime income options will meet IRS required minimum distributions (RMDs), although not all options are available with all contracts.

Period Certain

Provides income payments for a designated period of time — the period certain (typically 5- 30 years). If the annuitant dies before the end of the period certain, income payments will continue to the beneficiary for the remainder of the period.

Single Life options

• Single Life only: Provides income payments for the lifetime of the annuitant. Payments end at the annuitant’s death. This annuity option does not provide income or offer benefits to heirs or survivors.
• Single Life only with Period Certain: Provides a guaranteed income throughout the lifetime of the annuitant with an additional guarantee that if the annuitant dies before the end of the period certain, income payments will continue to the beneficiary for the remainder of the period.
• Single Life only with Cash Refund1: Guarantees an income throughout the lifetime of the annuitant. If at the annuitant’s death, the total income payments made are less than the amount annuitized, the difference is paid to the beneficiary in a lump sum payment.
• Single Life only with Installment Refund1: Guarantees an income throughout the lifetime of the annuitant. If at the annuitant’s death, the total income payments made are less than the amount annuitized, income payments will continue to the beneficiary until the total income payments equal the amount annuitized.

Joint Life options

• Joint Life with 100%, 66.67% or 50% to Survivor: Provides income payments for as long as either annuitant is alive, with the surviving individual receiving the applicable percentage of the original payment. This will not provide income or offer benefits to heirs or survivors other than the joint annuitants.
• Joint Life with Period Certain and 100%, 66.67% or 50% to Survivor: Provides income payments for as long as either annuitant is alive, with the surviving individual receiving the applicable percentage of the original payment. After the death of the first individual, income payments continue at 100% until the end of the period certain and thereafter at the applicable amount (i.e., 100%, 66.67% or 50% of the original payment) until the surviving individual’s death. If both individuals die prior to the end of the period certain, income payments will continue at 100% to the beneficiary for the remainder of the period.
• Joint Life with Cash Refund1: Guarantees an income for as long as either annuitant is alive. If upon the death of both individuals the total income payments made are less than the original amount annuitized, the difference will be paid to the beneficiary in a lump sum.

1 Not available with variable annuities.

This article is for informational and educational purposes only. It should not be used to make a buying decision. If you would like to speak with a financial professional, please use Annuity Alliance’s contact form.

An annuity is intended to be a long-term, tax-deferred retirement vehicle. Earnings are taxable as ordinary income when distributed, and if withdrawn before age 59½, may be subject to a 10% federal tax penalty. If the annuity will fund an IRA or other tax qualified plan, the tax deferral feature offers no additional value. Qualified distributions from a Roth IRA are generally excluded from gross income, but taxes and penalties may apply to non-qualified distributions. Please consult a tax advisor for specific information. There are charges and expenses associated with annuities, such as deferred sales charges (surrender charges) for early withdrawals. Variable annuities have additional expenses such as mortality and expense risk, administrative charges, investment management fees and rider fees. Variable annuities are subject to market fluctuation, investment risk and loss of principal.

Income payments and withdrawals from immediate annuities are generally taxable as ordinary income in the year in which taken. When purchased as part of an IRA or other qualified plan, the IRA or qualified plan already provides tax deferral of earnings and the annuity contract does not provide any additional tax deferred treatment of earnings. Withdrawals taken from a qualified plan prior to age 59½ may incur a 10% federal tax penalty. Qualified distributions from a Roth IRA are generally excluded from gross income, but taxes and penalties may apply to non-qualified distributions.

Keep in mind that the Annuity Income Option, Frequency and Payment Dates cannot be changed once elected. Availability of some Period Certain durations may be limited.

This information should not be considered as tax or legal advice. Clients should consult their tax or legal advisor regarding their own tax or legal situation. This is a general communication for informational and educational purposes. The information is not designed, or intended, to be applicable to any person’s individual circumstances. It should not be considered investment advice, nor does it constitute a recommendation that anyone engage in (or refrain from) a particular course of action. If you are seeking investment advice or recommendations, please contact your financial professional.

A purpose of the method of marketing is solicitation of insurance and that contact will be made by an insurance agent or agency. You should consider the investment objectives, risks, charges and expenses of a portfolio and the variable insurance product carefully before investing. The portfolio and variable insurance product prospectuses contain this and other information. You may obtain a copy of the prospectus from your representative. Please read the prospectus carefully before investing.