Annuities can be a flexible way to create income in retirement. These insurance contracts offer a range of payout options, allowing you to build an income stream that aligns with your goals—whether that’s income for life, support for loved ones, or both.
Whether you need income now or want to plan for later, understanding your options can help you make a more confident decision.
Immediate vs. Deferred Annuities
One of the first decisions to make is when you’d like income to begin.
Immediate Annuities
Immediate annuities typically begin payments within one year of purchase. This option can be helpful if you’re ready to start drawing income now.
For example, if you’re retiring but plan to delay Social Security, an annuity can help fill the gap by providing a steady income stream. Depending on your choices, payments can last for a set period or for the rest of your life—giving you a level of predictability as you transition into retirement.
Related: Averse to Risk? Annuities May be the Answer
Deferred Annuities
Deferred annuities are designed for the future. Instead of starting income right away, your money remains in the contract, where it has the potential to grow over time.
Later, you can decide if and when to convert those funds into a stream of income. Some deferred annuities offer interest or market-based growth potential, and earnings grow tax-deferred.
Keep in mind, however, that certain options—like variable annuities—can fluctuate in value, which may impact future income unless backed by guarantees.
Choosing Between the Two
If you don’t need income right away, a deferred annuity may help you build a larger base for future income. On the other hand, an immediate annuity can provide steady payments right when you need them.
Each option involves trade-offs, so it’s important to consider both your current needs and your long-term plans.
Related: Type of Annuities Explained
Lifetime Income vs. Period Certain Options
Once you’ve decided when to take income, the next step is choosing how long payments will last.
Lifetime Income
A lifetime income option provides payments for as long as you live—and in some cases, for the life of a spouse if you choose a joint option.
This can help address one of the biggest concerns in retirement: outliving your savings. While single-life options typically offer higher payments, joint options ensure that income continues for a surviving spouse.
Related: Introducing Bankers Life Flexible Premium Bonus Indexed Annuity
Period Certain
A period certain option guarantees payments for a set number of years—such as 10, 20, or more.
You can also combine this with lifetime income. For example, a “lifetime with 20-year period certain” option ensures payments will continue for at least 20 years, even if you pass away sooner. This can help provide added financial support for beneficiaries.
Which Option Is Right for You?
The right choice depends on your personal situation.
- If you’re focused on maximizing income, a single lifetime option may provide the highest payments.
- If others rely on your income, a joint or period certain option can help provide continued support.
While options that include survivor benefits may result in slightly lower payments, they can offer added peace of mind.
Key Factors to Consider
As you evaluate your options, keep these considerations in mind:
- Timing of income: Do you need payments now, or are you planning for later?
- Health and longevity: Longer life expectancy may make lifetime income more valuable.
- Dependents: Consider whether someone else may need financial support if you pass away.
- Insurance company strength: Guarantees like lifetime income are based on the financial stability of the insurer, so it’s important to choose a well-rated company.
The Bottom Line
Annuities offer a range of payout options that can help you create an income plan tailored to your needs.
By thinking through when you’ll need income—and who may depend on it—you can choose an approach that works for your life today and your plans for the future. A financial professional can help you explore your options and find a path that fits.
Want more? Check out our blog, Navigating Annuity Payout Options
We’re Here for You!
Bankers Life is here to help customers with their financial and insurance needs so please visit us at BankersLife.com to learn more.
Bankers Life Securities, Inc., Bankers Life Advisory Services, Inc., and their representatives do not provide legal or tax advice. Each individual should seek specific advice from their own tax or legal advisors.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors. To determine which investment(s) may be appropriate for you, please consult your financial professional prior to investing.
Bankers Life is the marketing brand of various affiliated companies of CNO Financial Group including, Bankers Life and Casualty Company, Bankers Life Securities, Inc., and Bankers Life Advisory Services, Inc. Non-affiliated insurance products are offered through Bankers Life Securities General Agency, Inc., (dba BL General Insurance Agency, Inc., AK, AL, CA, NV, PA).
Securities and variable annuities offered through Bankers Life Securities, Inc. Member, FINRA/SIPC (dba BL Securities Inc., AL, GA, IA, IL, MI, NV, PA). Advisory products and services offered by Bankers Life Advisory Services, Inc. SEC Registered Investment Adviser (dba BL Advisory Services, Inc., AL, GA, IA, MT, NV, PA).
Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk.
Investments are: Not Guaranteed—Involve Risk—May Lose Value.
