Choosing Your Annuity Payout Options — How to Understand What’s Best for You

Written by Ariel Stern Updated October 24, 2025

If you’re shopping for an income annuity, it’s important to understand which payout options are available to you.

Your payout choice affects not only your payout rate, but also who’s covered under your income annuity and whether it includes death benefits.

Let’s examine annuity payout options and how they affect how your annuity performs.

What Are Annuity Payout Options?

When you buy an income annuity, you’ll have several payout options to choose from:

• Life or Period Certain — Does it last for a set number of years?
• Single or Joint Life — If it lasts for life, does it cover one or two lives?
• Death Benefits — Can the annuity provide for beneficiaries?
• Continuation — For joint annuities, at which rate does the survivor continue receiving income?

The table above summarizes the main annuity payout types. Let’s look more closely at how each option works and what to consider.

Life or Period Certain, Which Should You Choose?

This is one of the most fundamental questions when choosing your annuity payout: do you want it to guarantee income for life or just a period of time?

If you purchase a life annuity, your annuity will be guaranteed to last as long as you live. With this type of annuity, your payout rate depends on your life expectancy. As a result, your age plays an important role in determining your payout.

If you want your annuity to last only a set number of years, you should choose a period certain annuity. A period certain annuity pays for a certain number of years only. You can select anywhere from 5 to 30 years.

Period certain annuities are not dependent on your age, as they pay a certain number of years only and not your lifetime.

Can You Provide For Your Spouse with an Income Annuity?

Yes, you can set up your income annuity so that it covers not only your lifetime but also your spouse’s. Here’s how lifetime annuities work:

• Single Life Annuity — income guaranteed to last for one person’s lifetime
• Joint Life Annuity — income guaranteed to last for as long as either person is living

Your choice of single or joint life not only affects how long your annuity payments last, but also affects your annuity payout rate. If you choose a single life annuity, it will only be based on one person’s life expectancy.

However, if you choose a joint life annuity, the annuity rate will be based on the life expectancies of both people. Because the insurer must account for both life expectancies, your payout rate will typically be lower if your joint annuitant is younger.

Many people consider whether they should purchase two single life annuities or one joint life annuity. If you have a loved one you wish to provide for, you can run annuity quotes for both to see which option will work best for you and your future income needs.

Do Income Annuities Offer Death Benefits? Understanding Payout Options

For lifetime annuities, whether beneficiaries are included depends on the payout option you select.

If you go with a period certain annuity, you will have beneficiaries, as period certain annuities are guaranteed to pay for that period of time regardless of whether you are alive or not.

If you go with a lifetime annuity, see below to see how annuity payout options affect your beneficiaries:

• Life Only — only lasts for the lifetime of the annuitant(s), no death benefit
• Life with Period Certain — last as long as the annuitant(s) is alive, or the number of years in the period certain, whichever is longer
• Life with Cash Refund — lasts as long as the annuitant(s) is alive, but is guaranteed to return the premium. If the annuitant(s) die before getting the full premium back, the remainder is paid to beneficiaries as a lump sum.
• Life with Installment Refund — pays as long as the annuitant(s) is alive, and also guarantees the return of the original premium. If the annuitant(s) die before getting the premium back in full, the unpaid balance of the premium goes to the beneficiaries in the same installments the annuitant(s) were receiving until the premium is returned.

If you are considering an annuity with death benefits, make sure you read our article about beneficiaries.

Do Annuities Continue Full Benefits to the Joint Annuitant?

When one of the annuitants dies in a joint life annuity, you can decide if the surviving annuitant receives the full income amount both were receiving or gets a reduction in payout rate.

This is called “continuation” for joint life annuities. If your annuity has 100% continuation (which all of our quotes do), the surviving annuitant will receive the exact same payout amount as when both annuitants were alive.

If your joint life annuity includes reduced continuation benefits, the surviving annuitant’s income will reduce to a specified percentage, such as 75 or 50%. You can choose if the reduction applies to both annuitants, or just one of them. This reduction is set when you purchase the annuity.

Having a reduction in your joint life annuity will normally increase the payout rate. The insurer is factoring in the probability that one annuitant passes, and they get to reduce their payments to the remaining annuitant.

This option is popular for couples who expect lower expenses after one spouse passes away. If you want to see joint life annuities with reductions in benefits, you will have to call our annuity experts at (866) 866-1999. They will run these quotes for you.

Need Help Understanding Annuity Payouts?

If you want expert insight into how annuity payout types affect annuity rates and death benefits, call us at (866) 866-1999. We can walk you through the different payout options available and help you choose the one that best fits your needs.

You can also run quotes on the blue annuity calculator on this page to instantly see how different annuity types will impact your payout rates. In just a few steps, you’ll see guaranteed rates from top-rated insurance companies. Best of all, our quotes are fast, easy, and free. There is no phone number required and absolutely no obligation.

References:

• “Annuity payout options” Office of the Insurance Commissioner, Washington State.
• “Annuity - Payout Options” Bureau of Insurance, State of Maine.
• “Consumer’s Guide to Understanding Annuities” Wisconsin Office of the Commissioner of Insurance.