Written By : Kim Borwick
Financially Reviewed By : Rubina K. Hossain, CFP®
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A straight life annuity is an annuity that pays a guaranteed stream of income but ceases payments upon the death of the annuity holder. Straight life annuities do not include a death benefit, so payments can’t be made to a beneficiary. Because the payouts will be shorter in duration, they offer the highest periodic payments.

Single retirees with no heirs stand to gain the most from a straight life annuity. These annuities guarantee payments for the rest of the annuity holder’s life, and the payouts are higher because the annuity doesn’t have to continue paying income to a surviving spouse or other dependent.

What Is a Straight Life Annuity?

Annuities can be structured to accommodate a variety of payout schedules. Straight life annuities, also called single life annuities or life only annuities, are contracts that guarantee a stream of income for the lifetime of only one person — the annuity owner.

They do not provide income to surviving spouses or additional annuitants when the annuity owner dies. The high monthly payouts and lack of a legacy or sustained income stream makes this annuity uniquely suitable for a single person who has no intention of providing financially for others after he or she dies.

As part of a holistic financial strategy and diverse portfolio, a single life annuity may benefit married people or retirees with alternative sources of income and other assets to leave to beneficiaries. Retirees who have begun their estate planning may find that a single life annuity can fill a gap left by other investments and retirement savings accounts.

When Does a Straight Life Annuity Benefit Married Couples?

Married people generally opt for an annuity structured in such a way that it can continue to provide income to the surviving spouse after the annuity holder dies.

It may make sense, however, for a married person to buy a straight life annuity if his or her spouse has another income stream. This allows the annuity holder to maximize retirement income without worrying about leaving a surviving spouse with nothing to live on.

Alternative Annuity Payout Options

As with every other feature of an annuity, payouts can be structured to suit your needs. If your objective is to provide income for your spouse upon your death or leave financial assets to a beneficiary, you’ll be better off purchasing an annuity with a different payout structure.

Annuity payout options include:
  • Life Annuity with Period Certain (Fixed Period/Guaranteed Term)
  • Joint and Survivor Annuity
  • Lump-Sum Payment
  • Systematic Annuity Withdrawal
  • Early Withdrawal

None of these options is inherently better than the others. According to the Bureau of Labor Statistics, payout decisions are not only about monetary value. The type of payout you select should align with your long-term goals and retirement lifestyle.

Joint and Survivor Annuities

One way to solve for the problem of leaving a surviving spouse without an income after you die is to purchase a joint and survivor annuity. Unlike straight life annuities, joint and survivor annuities guarantee payments for the life of the contract owner and the life of one other person.

Because these payments last longer — beyond the death of the first annuitant — payments are slightly lower. You can also establish a payout schedule that distributes slightly larger amounts while both annuitants are still alive and then reduces the amount of income the surviving spouse receives by 25 to 50 percent.

Period Certain

Period certain annuities have a predetermined duration of payments. This option makes sense for older retirees or people in poor health because period certain annuities protect them against losing the majority of their premium in the event that they die soon after their purchase.

Contrary to the terms of a single life annuity, which state that the cash value goes to the insurer, if the annuity holder of a period certain annuity dies before the end of the term, benefits will continue to a designated beneficiary for the remainder of the time period.

Please seek the advice of a qualified professional before making financial decisions.
Last Modified: October 21, 2020

2 Cited Research Articles

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  1. Consumer Reports. (2014, March). Your best pension payout options. Retrieved from https://www.consumerreports.org/cro/2014/03/best-pension-payout-option/index.htm
  2. Wiatrowski, W. (2016, June 17). You’re getting a pension: What are your payment options? Retrieved from https://www.bls.gov/opub/btn/volume-5/youre-getting-a-pension-what-are-your-payment-options.htm