Do I Have To Annuitize My Annuity Income?

Shawn Plummer

CEO, The Annuity Expert

Annuity income is a type of retirement income that gives you a steady stream of payments for the rest of your life. It can be a great way to ensure that you have a steady income in retirement, and there are many different types of annuities to choose from. In this guide, we will discuss what annuity income is and how it works. We will also discuss the different types of annuities available and help you decide if annuity income is suitable for you!

Why Would I Want Annuity Income?

There are a few reasons why you might want to consider annuity income. First of all, it can provide you with a steady stream of income in retirement. This can be an excellent way to supplement your other retirement income sources and ensure you have enough money to cover your expenses.

Another reason to consider annuity income is to help protect your assets. If you have a lot of money saved, you may be worried about outliving your savings. With an annuity, you can use your savings to purchase an income stream that will last for the rest of your life. This can give you peace of mind knowing that you will have income even if you live a long time.

The Misconception About Annuity Income

There is a lot of confusion about how to get income from annuities. For example, people are unsure if they should annuitize or take guaranteed lifetime withdrawals. The truth is that there are many different ways to get income from annuities, and the best way for you will depend on your circumstances.

The best way to figure out what is right for you is to talk to an expert, like The Annuity Expert. We can help you understand the options available and make sure you make the best decision for your needs.

What Does Annuitizing Mean?

You begin receiving payments from the insurance company when you annuitize an annuity through a process called annuitization. You can choose to annuitize your annuity anytime, but most people wait until retirement. Once you annuitize, you cannot change your mind, so you must be sure that you are ready to start receiving payments before you annuitize.

What Are Lifetime Withdrawals?

Lifetime withdrawals are another way to receive payments from your annuity. With lifetime withdrawals, you can take out a certain amount of money each year for as long as you live. The amount you can withdraw will depend on the terms of your annuity contract.

What’s The Difference Between Annuitizing And Lifetime Withdrawals?

Annuities offer two methods to distribute an income to a policyholder, annuitized annuity payments and lifetime withdrawals. The main difference between annuitizing and lifetime withdrawals is that with annuitizing, you cannot change your mind once you start receiving payments. On the other hand, with lifetime withdrawals, you can take out money each year (up to a specific amount), but you are not committed to taking out a certain amount each year.

Below are the pros and cons between lifetime withdrawals and annuity payments.

Lifetime WithdrawalsAnnuity Payments
Flexibility to start/stop income streamPotential higher payouts
Potential to increase the income amountTax-favored withdrawals on nonqualified annuities
Costs range from no cost to 1.25% annuallyNo additional fees
Potential to earn interestIrrevocable payments
Future income guaranteed todayCan not be surrendered; No refunds
Can be canceledEarns approximately 1% interest annually
Lump-Sum Death BenefitNo liquidity
Help with long-term care costsNo death benefit or series of payments
Standard liquidityCan not help healthcare costs

Next Steps

So, what’s the verdict? Annuitized distributions are an excellent choice for those who want guaranteed income for life. But lifetime withdrawals may be better if you want some control over your assets. Regardless of your route, you must speak with an experienced estate planner to find the best solution for your unique needs.

Use our annuity income calculator to determine how much income you could receive for the rest of your life. Then contact us today for a free consultation and quote – we would be happy to help!

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Frequently Asked Questions

What does annuitize mean?

Annuitize converts a lump sum of money into an irrevocable income stream of payments that can last for a specific period or for the rest of your life.

What is an annuitized distribution?

An annuitized distribution is a series of irrevocable payments made from an annuity based on the account balance and the annuitant’s life expectancy. The payments are made at regular intervals, typically monthly or yearly, and continue for as long as the annuitant lives.

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Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

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

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