Annuities: Taking Your Money Out

Calculating Payouts
A payout is the money you receive when you take money out of your annuity. The amount of income you receive from your annuity depends on the type of annuity you own and how you decide to set up your payout plan. Factors affecting your payout include:

• Your life expectancy, if you selected a lifetime payout plan.
• The premiums you paid plus any earnings.
• The rate of return the company credits your account, if you purchased a fixed annuity.
• The investment performance of the funds you have chosen, if you purchased a variable annuity.

Options for Payouts
There are many options for receiving payouts from an annuity. These options can usually be mixed and matched to provide an ideal income plan for your needs.

Straight life annuity
You receive income for the rest of your life. The payments will continue even after all the money you have put into the annuity has been exhausted. However, if you die before all the money in your account has been returned, no payouts will be made to your heirs. People who need the maximum amount of income and either have no dependents or have taken care of them through other means often use this payout method.

Joint and survivor annuity – Life income for two
You receive income as long as you live, and after your death, your designated beneficiary receives income as long as he or she lives. You can choose the benefit your survivor will receive upon your death, but the option you choose for your beneficiary will affect the payout amount you receive.

Life income with refund annuity
You receive income for life. If you die before receiving an amount equal to all of the premiums you had paid, your beneficiary collects the portion you had not yet received.

Life annuity with period certain
You receive payouts for life; there is also a guarantee provision: If you die within a certain period after you start receiving income, usually 10 or 20 years, your beneficiary will receive regular payouts for the balance of that period.

Other options
You can receive your payout all at once in a lump sum or over a period of years in a series of payouts known as a systematic distribution.