How Do Annuities Pay Out?

Annuities pay out based on when you start income (immediate or deferred) and how long payments last (for a set period, your lifetime, or both spouses’ lifetimes). Common options include period certain, single life, life with period certain, joint & survivor, lump sum, and systematic withdrawal. Your monthly amount depends on factors like age, sex, premium size, payout type, and insurer rates. Many contracts also include a death benefit for beneficiaries.

When Payments Start

When it comes to creating reliable retirement income, timing matters. Some people want predictable checks right away to cover living expenses, while others prefer to let their money grow before tapping into it later. These two common paths — immediate and deferred annuities — each offer unique advantages depending on your goals, timeline, and comfort level with risk. Use the cards below to see which option fits your needs best.

How Long Payments Last

Annuities let you choose how long income lasts — for a fixed period, your lifetime, or both you and your spouse. Each option balances monthly payout size with the level of protection you want for heirs. Explore the most common payout structures below to see which aligns with your retirement goals.

Adding guarantees or a survivor reduces each payment but increases protection.

How Payouts Are Calculated

Every annuity payout is calculated with your personal details in mind. Factors like when you start, how long you’re expected to live, how much you put in, and which payout option you choose all shape the size of your monthly check. Understanding these drivers makes it easier to compare options and see how even small changes can affect your retirement income.

What drives your monthly payment:

• Age at start: Older start = fewer expected payments = higher per-payment amount 
• Sex: Women typically receive slightly lower payments (longer life expectancy) 
• Premium amount & rate: More in → more out; offered rates matter 
• Payout type: Life-only pays more than life-with-guarantees or joint options

John vs. Mary — How Timing and Options Affect Payments

Assume John, age 70, and Mary, age 65, each put $100,000 into a single premium immediate annuity.

John (age 70, male) chooses a life-only payout. Because he’s older and has a shorter life expectancy, his monthly payment is higher — around $650 per month.

Mary (age 65, female) chooses a joint-and-survivor payout so income continues for her and her husband. Because women live longer on average and the contract guarantees income for two lifetimes, her monthly payment is lower — around $520 per month.

Takeaway: John maximizes his own income, while Mary accepts a smaller monthly amount to ensure her husband is financially secure if she passes first. This trade-off shows how age, sex, premium size, and payout type work together to shape annuity income.

Death Benefit

Annuities aren’t just about the income you receive during your lifetime, many contracts also outline what happens afterward. If you want to leave money behind for your spouse or heirs, the death benefit determines how (and when) your beneficiaries will receive those funds. Understanding the differences between qualified and non-qualified annuities can help you set clear expectations and avoid surprises for your loved ones. 

How Death Benefits Are Paid

• Qualified annuities: Beneficiaries generally must withdraw the full value within 10 years of death. 
• Nonqualified annuities: Options may include a lump sum (subject to the five-year rule) or life-expectancy-based withdrawals. 
• If no beneficiary is named: Proceeds may go to the estate.

How Carol Used a Death Benefit

Carol, age 62, purchased a deferred annuity to supplement her retirement income. Her biggest concern wasn’t just steady income for herself — it was making sure her two children would still be supported if she passed away early.

She chose a life with 10-year period certain payout. This guaranteed her lifetime income, but also ensured that if she died before the 10 years were up, her children would continue receiving the remaining payments.

Takeaway: Adding a death benefit or period-certain feature often reduces the monthly payout, but it creates lasting protection for loved ones. This trade-off reflects a common priority among retirees who don’t want their family to face financial uncertainty

Choosing how an annuity pays out is one of the most important retirement decisions you’ll make. The option you select determines not only when your income begins but also how long it lasts and whether your spouse or heirs are protected after you’re gone. Some people prioritize the largest possible monthly check, while others prefer the peace of mind that comes with survivor benefits or guaranteed minimum payout periods.

As you’ve seen, there is no single “best” choice — only the option that best fits your age, health, financial needs, and family goals. That’s why it’s worth taking the time to run the numbers, compare scenarios, and talk through the trade-offs with a licensed annuity specialist. A professional can help you weigh higher income today against longer-term security, so you can feel confident that your annuity payout aligns with your broader retirement plan.

Annuities come with various payout options, and as I sell my clients an annuity, I always discuss the various ways an annuity pays out. Guiding my clients on the front end helps them make an informed decision and helps me, as an agent, decide the best product for them. People buy annuities to satisfy their retirement goals, so when to get a payout from their annuity is an important aspect I discuss with them at sale time and at policy reviews.

Aamir M. Chalisa, MBA, LUTCF, MDRTGeneral Manager at Futurity First Insurance Group

Aamir M. Chalisa is the GM at Futurity First, leading Oak Brook’s top branch. With 30+ years’ expertise, chairs GAMA Global, driving diversity worldwide.