How long does an annuity last?

Annuities are designed to provide a guaranteed income in retirement, and they can be customized to fit your retirement needs. One of the annuity features you can customize is the annuity period. An annuity allows you to choose a contract term length or spread payments over your lifetime.

Annuities can last from a few years to a lifetime. You can choose a period certain annuity payout, where the annuity payouts are spread over a period of five years to 30 years. You can also choose a life annuity, which guarantees payouts for the rest of your life. If you are a married couple, you can buy a joint and survivor annuity, which guarantees income payments as long as either of the joint annuitants is alive.

How many years does an annuity last?

When you purchase an annuity, you can choose how long the annuity payments last. An annuity has two phases i.e. accumulation phase and distribution phase. During the accumulation phase, the annuity grows and earns interest, while in the distribution phase, the annuity starts paying a regular stream of income.

You can also choose a contract term length such as 5 years, 7 years, 10 years, etc. Once the contract term lapses, you can choose to convert your annuity to the payout phase and start receiving payments. You can take a single lump sum payment, regular payments over a specified period, or spread payments over your lifetime.

Do annuities last for life?

You can opt to receive annuity payments for the rest of your life. When you annuitize an annuity, you choose how long payments will last. If you choose to receive payments for life, you are guaranteed to receive a stream of income for the rest of your life. The payments will stop when you die, even if you had not received the full value of the annuity.

If you are a married couple and purchase a joint and survivor annuity, the payments will continue after the death of one of the annuitants. The surviving annuitant will still receive payments for the remainder of their life.

Annuity payout options

Lump sum payouts

When you request a lump sum payout, you will receive a single lump sum payment. However, this option ends the annuity contract, and you won’t receive further payments. Taking a lump sum payment can be useful if you need the money for an emergency or a large purchase.

Fixed-Period payouts

When you choose a fixed-period annuity, you specify how long you will receive the annuity payments. The annuity will provide payments for the specified period, and once the period ends, the annuity payments stop, even if the annuitant is still alive. Payout periods for a fixed-period annuity can range from 5 to 30 years.

For example, if you purchase an annuity with a 15-year payout period, you will receive income payments for 15 years. At the end of the 15 years, the payments will stop, and you won't receive further payments even if you are alive. If you die during the annuity period, the remaining annuity balance will be paid to your beneficiaries.

Life payouts

When you choose a life payout, you will receive a guaranteed income for the rest of your life. The payments only stop when you die, even if you have not received the full value of the annuity.

Unlike fixed-period payouts, a life payout option does not provide income to the surviving spouse or beneficiaries unless the annuity has a death benefit. Some annuities may require annuitants to purchase an additional rider to get this benefit.

One of the factors that determine how much payouts you receive from a life annuity is the annuitant’s life expectancy. The annuity provider must consider how long the annuitant will live to determine the size of the periodic payments.

Life annuity with period certain

A life annuity with period certain combines the features of a fixed-period annuity and a life annuity. This annuity guarantees you an income until you die, but it also guarantees an income for a minimum period even if you die earlier.

For example, if you purchase a life annuity with a fixed period of 20 years, and you die in the 7^th year, the remaining payments will be paid to your beneficiary. If you selected a joint-life option, the surviving spouse will continue receiving annuity payments.

If the annuity owner outlives the period specified in the annuity contract, the payments will continue for their lifetime. This ensures that the annuitant does not outlive the annuity and that heirs receive the remaining balance if the annuitant dies early.

Joint and survivor annuity

If you are a married couple, or you want another person to continue receiving the annuity payments, you can purchase a joint and survivor annuity. In this annuity, the first annuitant will receive payments for their lifetime. When the first annuitant dies, the second annuitant will continue receiving annuity payments for the rest of their life.

A joint and survivor annuity allows the annuitants to decide how much payments to receive. The annuitants could choose to receive higher periodic payments when they are alive, and reduce payments when one spouse dies.

What affects the annuity payout period?

When you purchase an annuity that guarantees payouts over your lifetime, any factors that affect your life expectancy can determine the annuity payout period.

Annuitant’s age

The age when you start receiving annuity payments can determine the payout period. Generally, older annuitants have a shorter life expectancy, hence will have a shorter annuity period than younger annuitants. For example, a 70-year-old will have a short payout period than a 62-year-old annuitant.

Gender

Women tend to have a longer life expectancy than men, and this difference reflects in the annuity payout period. Hence, a 65-year-old female will have a longer payout period than a male annuitant of the same age.

Health status

If you have an underlying condition that reduces your life expectancy, you will have a shorter expected annuity period than an annuitant with no medical conditions.