The Role Of An Annuitant

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

What is an Annuitant?

An annuitant plays a vital role in retirement planning by ensuring a steady income stream for financial security in the golden years. An annuitant is entitled to regular payments from a pension or annuity investment. They can be the contract holder or another person, such as a surviving spouse. Annuities are often tied to employee pension plans or life insurance products, and the size of the payments is based on the annuitant’s life expectancy and the amount invested.

Key Takeaways:

  • An annuitant is entitled to regular payments from a pension or annuity investment.
  • An annuitant ensures a steady income stream for financial security in retirement.
  • Annuities are often tied to employee pension plans or life insurance products.
  • The size of annuity payments is based on the annuitant’s life expectancy and the amount invested.
  • Annuities provide a fixed income and long-term savings for the annuitant.
Annuitant Meaning

Types of Annuitants

The Retired Annuitant

As a ‘retired annuitant,’ you’re in a phase where the annuity you invested in is now a source of regular income during your retirement years. It’s a time of fruition, where your past financial decisions mature into tangible financial security. This stage underscores the importance of strategic planning, as the right annuity plan can significantly enhance your retirement lifestyle.

Joint Annuitants

A ‘joint annuitant‘ is commonly your spouse or another person who receives payments after your death. This continuation depends on the type of annuity plan purchased. It’s a way of extending financial protection to someone else through your annuity investment, ensuring they have a secure financial cushion to fall back on.

Contingent Annuitant

A ‘contingent annuitant‘ comes into play if both the primary annuitant and the joint annuitant pass away. This individual will then start receiving the annuity payments, ensuring the financial strategy’s continuity and support extend beyond the immediate circle.


Annuity Contract Features

An annuity contract involves three key parties: the annuitant, the annuity owner, and the beneficiaries. Each plays a distinct role in the annuity arrangement.

The Annuitant

The annuitant is the individual whose life is used to calculate annuity payouts. They are typically the person who will receive the regular payments from the annuity. The size of the payments is based on the annuitant’s age and life expectancy.

The Annuity Owner

The annuity owner is the annuity purchaser and is responsible for making contributions or premiums to the annuity contract. They have the authority to change the contract, such as adjusting the payment frequency or choosing beneficiaries. Contributions and withdrawals can only be made by the annuity owner.

The Beneficiaries

Beneficiaries are individuals who will receive death benefits from the annuity contract in the event of the annuitant’s death. They are named by the annuity owner and cannot make changes to the contract. The beneficiaries may include one or more individuals, such as a spouse or child, who will receive a portion or all of the annuity funds upon the annuitant’s passing.

Overall, the annuity contract ensures that the annuitant receives regular payments, the annuity owner manages the contributions and withdrawals, and the beneficiaries receive death benefits as specified in the contract.

Annuitant vs. Owner

Here’s where it gets interesting. The ‘owner’ of the annuity is the person who buys the annuity and has all the rights to the contract. This individual controls the asset, makes decisions regarding withdrawals, and designates beneficiaries. However, the ‘annuitant’ is the person whose life expectancy affects the annuity’s payment calculations and duration.

In many cases, the annuitant and the owner are the same person, ensuring a direct correlation between investment and benefit. However, they can be different, allowing for strategic financial planning, especially in families or businesses. For instance, a parent might purchase an annuity as the owner but name an adult child as the annuitant, ensuring longer-term financial stability based on the younger age of the annuitant.

This table underscores the distinct roles and responsibilities of annuitants and annuity owners.

AspectAnnuitantAnnuity Owner
DefinitionThe individual whose life expectancy is used to calculate annuity payments.The individual or entity who purchases the annuity and holds the contract.
RoleThe annuitant is the person receiving the benefits or payments from the annuity. Their lifespan significantly influences the annuity’s payout phase.The owner has control over the annuity contract, makes contributions, decides on the payout method, and can make certain changes to the policy.
Financial ControlThe annuitant does not have direct control over the annuity contract but is the one who receives the payments.The owner has full financial control, including the right to withdraw funds, assign beneficiaries, or even surrender the annuity for its cash value.
Life ExpectancyThe annuitant’s life expectancy is crucial as it determines the amount and duration of the annuity payments.While the owner’s life expectancy might not directly affect the annuity, they must consider it when selecting the type of annuity and payout options.
DeathIn the event of the annuitant’s death, the future of the annuity payments depends on the contract’s terms, such as whether there’s a surviving joint annuitant or specified beneficiaries.Upon the death of the owner, control of the annuity contract may pass to the designated beneficiary. The subsequent handling of the annuity depends on the contract’s terms and conditions.
BeneficiariesThe annuitant can be a beneficiary but typically does not designate them. That’s the owner’s role.The owner designates beneficiaries who will receive the annuity’s benefits or remaining funds after the owner’s (or annuitant’s, if different) death.
Tax ImplicationsThe annuitant’s tax responsibility begins when they start receiving payments, affecting their personal income taxes.The owner can face tax implications during different phases of the annuity contract, such as upon withdrawal or surrender of the policy.
What Is An Annuitant

Annuitant vs. Beneficiary

The ‘beneficiary’ enters the picture upon the annuitant’s passing. They are the individuals or entities designated to receive benefits if the annuitant dies before the end of the annuity contract. Understanding this distinction is crucial because it directly impacts the benefits flow and could shape your financial legacy.

This comparative analysis highlights the distinct functionalities and responsibilities of beneficiaries and annuitants.

DefinitionAn individual or entity designated to receive benefits or funds after the annuitant’s death.The individual whose life expectancy is used to calculate annuity payments and who receives the income from the annuity.
Role in AnnuityThe beneficiary receives the remaining benefits or funds of the annuity after the annuitant’s death, depending on the terms of the contract.The annuitant is central to the annuity contract, with payments calculated based on their life expectancy and, in most cases, ceasing upon their death.
Financial ControlThe beneficiary’s role comes into play upon the annuitant’s death; they are the next in line to receive benefits or funds, as per the contract’s terms.While the recipient of the funds, the annuitant does not typically have control over the annuity policy; this control often resides with the owner.
Life ExpectancyThe life expectancy of a beneficiary does not influence the annuity payments. Their role activates after the annuitant’s death.The life expectancy of the annuitant is a primary factor in determining the duration and amount of annuity payments.
DeathThe owner of the annuity contract designates beneficiaries. They can be relatives, friends, trusts, charities, or other entities.The annuitant’s life expectancy is a primary factor in determining the duration and amount of annuity payments.
DesignationBeneficiaries may face tax implications on received payments from the annuity, depending on the type and the jurisdiction’s tax laws.The annuitant’s death is often the terminating event for the annuity payments, depending on whether there are surviving beneficiaries or other stipulations in the contract.
Tax ImplicationsThe annuitant’s tax responsibility is tied to the income received from the annuity, impacting their income taxes.The annuitant is named at the time the annuity is purchased. Often, the annuitant is also the annuity’s owner, but not always.
Annuitant Definition

Annuitant Vs. Owner-Driven Annuity Contract

This table underscores the importance of understanding who the annuity contract is tied to and whose life expectancy and death are the key determinants in the contract’s management and benefit payout.

AspectOwner-Driven Annuity ContractAnnuitant-Driven Annuity Contract
DefinitionAn annuitant-driven annuity contract is one where the various provisions and benefits of the contract are based on the annuitant’s life.An annuitant-driven annuity contract is one where the various provisions and benefits of the contract are based on the life of the annuitant.
Control and ManagementAn owner-driven annuity contract is one where the contract provisions (including death benefits) are primarily based on the owner’s life.While the annuitant is the measurement life for the contract, they may not have direct control over the contract’s terms unless they are also the owner.
Death BenefitsThe death of the owner is the triggering event for death benefits, regardless of the annuitant’s status. This means the contract’s residual value or guaranteed benefits are paid out upon the owner’s death.The death of the annuitant is the triggering event for benefits. If the annuitant dies, the contract stipulates what happens next, often the payment of a death benefit or the termination of the contract.
Life ExpectancyIn this type of contract, the owner has significant control, making key decisions about contributions, withdrawals, and other annuity contract terms.The annuitant’s life expectancy is central to the contract, used in calculating the amount and duration of annuity payments.
Tax ImplicationsThe tax implications for withdrawals, income, or death benefits are based on the owner’s circumstances, as they control the assets and make decisions about the annuity.Tax implications are typically tied to the annuitant’s life in terms of income stream. However, specific tax responsibilities may rest with the owner if different from the annuitant.
Beneficiary ConsiderationsIn owner-driven contracts, the owner designates the beneficiaries, and the benefits are often paid out based on the owner’s death.In annuitant-driven contracts, the annuitant’s status is crucial, and their death can trigger the transfer of benefits to designated beneficiaries.
Contract Continuation or TerminationThe contract’s future, whether it continues or terminates, depends on the owner’s status and the stipulated provisions upon their death.The future of the contract is largely dependent on the annuitant’s status (i.e., whether they are alive or deceased), influencing whether the contract continues, changes, or terminates.

Taxes on Annuitants

Annuities are a popular investment tool for individuals looking to secure a steady income stream in retirement. However, it is important to understand the tax implications associated with annuity payments, especially for annuitants who rely on these payments as a source of income. In this section, we will explore how annuity payments are taxed, focusing on ordinary income taxation and the treatment of employer pensions.

Ordinary Income Taxation

When it comes to taxation, annuities are generally treated as ordinary income. This means that the amount of tax owed on annuity payments is based on the individual’s ordinary income tax rate rather than the typically lower capital gains tax rate. The portion of annuity payments representing the contract holder’s basis is not subject to taxation, as it is considered a return on the annuitant’s original investment. However, any gains earned on the annuity are taxable.

For example, an annuitant contributed $100,000 to an annuity over the years, which has grown to $150,000. The annuitant would only be taxed on the $50,000 gain when receiving annuity payments, not the full $150,000.

Taxation of Employer Pensions

Employer pensions, which are a common form of an annuity, are usually taxed as ordinary income in their entirety. This means that all payments received from an employer pension plan are subject to the annuitant’s ordinary income tax rate. Annuitants need to understand this tax treatment, as it can impact their overall tax liability and financial planning in retirement.

Annuity payments are generally taxed as ordinary income, with the gains portion subject to taxation. Employer pensions are typically taxed as ordinary income in their entirety. Annuitants need to consult with tax professionals and consider the tax implications of annuity payments when planning for their financial future.

Tax TreatmentDescription
Ordinary IncomeAnnuity payments are generally taxed as ordinary income
Contract Holder’s BasisThe portion of annuity payments that represents the contract holder’s basis is not subject to taxation
Gain PortionEarned gains on the annuity are taxable
Employer PensionsPayments from employer pensions are usually taxed as ordinary income

How We Can Help

At The Annuity Expert, we understand the complexities and emotional aspects of planning for retirement. For over 15 years, we’ve been dedicated to helping you find the best solutions at the lowest costs as an insurance agency, annuity broker, and retirement planner. We know your core problem: securing a stable and sufficient income during retirement.

We recognize the symptoms of this problem: anxiety about financial security, confusion over various annuity options, and the fear of outliving your savings. These concerns can significantly impact your peace of mind. Our goal is to alleviate these worries by providing clear, expert guidance.

We stand for making retirement planning straightforward and accessible. We fight against unnecessary costs and complexities, ensuring you get the most out of your investments.


What We Recommend

To achieve a secure and comfortable retirement, follow these high-level steps:

Step 1: Initial Consultation

During your first consultation, we will discuss your financial goals, current savings, and retirement timeline. The main benefit is gaining a clear understanding of your needs and options. This personalized assessment helps us recommend the best annuity products for you.

Step 2: Customized Plan Development

In the next step, we create a customized annuity plan tailored to your specific needs. We explain each option, its benefits, and how it fits into your overall retirement strategy. The main benefit is having a clear, actionable plan that aligns with your financial goals.

Step 3: Implementation and Support

Finally, we assist you in implementing your annuity plan, offering continuous support and adjustments as needed. The main benefit is ongoing peace of mind, knowing your retirement strategy is being managed by experts.

Features and Benefits

  • Personalized Plans: Tailored to your unique financial situation, ensuring optimal outcomes.
  • Expert Guidance: Benefit from our 15 years of experience and comprehensive knowledge of annuities.
  • Cost-Effective Solutions: We prioritize finding the best solutions at the lowest costs, maximizing your retirement income.
  • Continuous Support: Ongoing assistance to adjust your plan as needed, ensuring it stays aligned with your goals.

Addressing Common Objections

  • Complexity: We simplify the process, breaking down complex information into easy-to-understand steps.
  • Costs: Our commitment to cost-effective solutions ensures you get the best value for your investment.
  • Trust: Our 15 years of expertise and proven track record build trust and reliability.

Without our guidance, you risk making uninformed decisions, potentially leading to insufficient retirement income and financial insecurity. However, by working with us, you secure a reliable income stream, personalized planning, and ongoing support, leading to a worry-free retirement.

Contact us for free advice or a quote, and let us help you achieve financial security for your retirement.

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Frequently Asked Questions

Who receives lifetime payments from an annuity?

The annuitant receives the lifetime payments from an annuity. An annuitant’s spouse can receive the lifetime payments if a joint-life payout is selected.

What is an example of an annuity?

Annuities include regular deposits to savings accounts, monthly home mortgage payments, monthly insurance payments, and pension payments. The frequency of payment dates determines the classification of annuities.

What does annuitant mean?

An “annuitant” is an individual whose life expectancy is used to calculate annuity payments and who receives the income from the annuity. They are the primary beneficiary of the annuity contract.

Who is the beneficiary of annuities?

Annuitants, usually owners, receive annuity benefit payments based on their life expectancy. When the annuitant passes away, the beneficiary receives the remaining contract value or the number of premiums minus any withdrawals as a death benefit.

What is the primary purpose of an annuity?

An annuity is an insurance product offering guaranteed income over a long period. It is famous for retirement income because it provides a regular payment stream, and its earnings grow tax-deferred until withdrawal.

What type of account is an annuity?

An annuity is an insurance contract that can offer a regular income during retirement. In addition, it offers tax benefits similar to an IRA in that the money invested in an annuity can grow tax-deferred until you begin receiving payments.

What is annuitant pay?

Annuities are given to surviving spouses, former spouses, and children of retired or active-duty military members who have passed away. These recipients of annuity are referred to as annuitants.

Who is the married annuitant?

A spousal RRSP is when one spouse owns the RRSP while the other contributes to it. This differs from a personal RRSP, where the same person is the owner and the contributor to the plan.

Does an annuitant have to be a natural person?

Yes, an annuitant must be a natural person because the annuity payments are calculated based on the life expectancy of an individual.

Can a corporation be an annuitant?

No, a corporation cannot be an annuitant. Annuities are financial products based on the life expectancy of a natural person. Since a corporation has no lifespan or mortality rate, it cannot receive or benefit directly from such policies.

What does an annuity protect the annuitant against?

An annuity protects the annuitant against outliving their savings by providing a steady stream of income for a specified period or life, ensuring financial stability regardless of how long the annuitant lives.

Can you change the annuitant on an annuity?

Yes, you can change the annuitant on an annuity, but it depends on the policy’s terms and the insurance company’s rules. It’s important to contact the insurer for specific guidelines and potential implications.

Can the annuitant be the same person as the annuity owner?

Yes, the annuitant and the annuity owner can be the same person. This is a common arrangement where the individual who purchases the annuity also receives the income payments.

What does insured annuitant mean?

“Insured annuitant” refers to the person whose life expectancy determines the duration and amount of payments in a life annuity. This person is also typically the recipient of the annuity payments.

What do annuities provide for annuitants?

Annuities provide annuitants with a steady income stream, typically for life or a specified period. They offer financial security by ensuring regular payments, which can be crucial for retirement planning and income stability.

What happens if the annuitant dies before annuitization?

If the annuitant dies before annuitization, the value of the annuity is typically paid to the beneficiary. The exact handling depends on the contract terms, which may offer options like a lump sum payment or continued payments to a designated beneficiary.

What is the role of an annuitant in retirement planning?

An annuitant plays a vital role in retirement planning as they are entitled to receive regular payments from a pension or annuity investment, providing a steady income stream for financial security in the golden years.

What is an annuitant?

An annuitant is entitled to regular payments from a pension or annuity investment, ensuring a steady income stream for financial security in retirement.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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