Can You Outlive an Annuity? What You Need To Know

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

How Annuities Provide An Income You Can’t Outlive

An annuity is a contract between you and an insurance company in which you make a lump sum payment or series of payments. In exchange, the insurance company agrees to make periodic payments to you for a specified period, usually during retirement. The payments can be made for a specific number of years or the rest of your life.

One of the main advantages of an annuity is that it can provide a stream of income you cannot outlive. So even if you live for 30 years after retirement, you will still have an income. This can be a great way to ensure you will never outlive your savings.

There Are Two Ways To Receive A Retirement Income For Life

There are two ways to receive annuity payments for life: annuitization or lifetime withdrawals.

  • With annuitization, you give the insurance company a lump sum of money, and they agree to make periodic payments to you for as long as you live. This payment method is irrevocable, so you cannot change your mind and get your money back.
  • You purchase a deferred annuity with a lifetime income rider with lifetime withdrawals, typically at an additional cost. This rider allows you to withdraw from your account while guaranteeing that you will receive payments for life, even if the account balance runs out.

The Benefits Of Receiving An Income You Won’t Outlive

There are several benefits of having an income you cannot outlive.

  • First, it can provide peace of mind knowing that you will never have to worry about running out of money in retirement.
  • Second, it can allow you to plan your retirement expenses more easily.
  • Third, it can help you avoid the need to take on debt in retirement.
  • Fourth, it can help you leave a legacy for your family or a favorite charity.

The Risks Of Receiving An Income From An Annuity

While an annuity can be a great way to ensure a steady income in retirement, there are some risks to consider before purchasing one.

  • First, some annuities have high fees, eating into your investment.
  • Second, annuitized payments are not liquid, meaning you cannot access your money if you need it before the specified period.
  • Third, variable annuities are subject to market risk, which means their value can go down if the markets decline.
  • Fourth, your beneficiaries will not receive any payments if you die with a straight life payout (annuitization).

Before you purchase an annuity, understand the risks and benefits. Annuities can be a great way to ensure a steady income in retirement, but they are not suitable for everyone. Talk to a financial advisor to see if an annuity is right.

The Bottom Line

Annuities can be a great way to ensure a steady income in retirement, but they are not suitable for everyone. Before you make any decisions, be sure to understand the risks and benefits of annuities. Then, request a quote today to see if an annuity is right for you. Thanks for reading!

Can You Outlive An Annuity?

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Frequently Asked Questions

Do annuities expire?

Annuities do not expire as they are designed to provide a steady stream of income for a specific period of life. However, some annuities may have contractually defined expiration dates, after which the payments stop. It is important to review the terms and conditions of an annuity contract to understand its specific provisions.

What happens if you outlive your annuity?

Some annuity payouts do not provide an income for life but rather a fixed period. If you outlive your annuity, you will not receive any more payments. This is one of the risks of annuities. Before you purchase an annuity, understand all the risks and benefits.

How do you get lifetime annuities?

You can purchase a lifetime income annuity from an independent licensed agent.

How much does a lifetime annuity cost?

Lifetime annuities can vary in cost depending on several factors, including age, health, and the type of annuity. Request a quote today to see how much a lifetime annuity would cost.

Can an annuity run out of money?

Yes, an annuity can run out of money if the payments exceed the funds within the annuity. This can happen if the annuitant lives longer than expected, or if the annuity is not managed properly. It is important to carefully plan and consider factors such as inflation, investment returns, and withdrawal rates to avoid running out of money.

How does an annuity work?

An annuity is a financial product that provides a regular income stream to an individual in exchange for an initial lump sum or series of payments. It works by investing the funds and then paying out a fixed sum over a predetermined period or for the rest of the person’s life. This ensures a steady income and can be a useful retirement strategy.

Which of the following types of annuity payouts could an annuitant outlive?

A life annuity is a financial product that guarantees a payout one cannot outlive. It provides a steady stream of income for the remainder of an individual’s life, offering financial security and peace of mind. With a life annuity, individuals can be assured of a regular payment, regardless of how long they live.

How long do annuities last?

Annuities last for a predetermined period or a person’s lifetime, depending on the type chosen. Fixed-term annuities typically have a specific duration, while lifetime annuities provide payments until the annuitant passes away. Variable annuities offer income that can fluctuate based on market performance. The longevity of annuities varies based on individual preferences and needs.

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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