Annuities are a structured payout from retirement plans or deferred annuities. Often called immediate annuities, an annuity payout can be structured in different ways. An immediate annuity from an insurance company usually offers a list of options. A retirement plan annuity might be more limited in its methods of payout.
Single Life Payout
The single life payout option results in a monthly check paid to the annuitant (person receiving annuity benefits) for as long as she lives. The single life payout will provide the largest monthly checks for a guaranteed lifetime income. The trade-off is that the payments stop when the annuitant dies, whether it is one month or 50 years after the annuity starts.
Joint and Survivor
The joint and survivor payout option has the monthly payments based on the life expectancy of two people, the annuitant and a designated beneficiary, usually the spouse of the annuitant. Under this option, if the annuitant dies first, the survivor will continue to receive payments for the rest of his life. The amount of the survivor's check is determined at the time the annuity started. Survivor benefits are often set at half, 75 percent or 100 percent of the amount to be received by the initial annuitant. The joint and survivor option guarantees a spouse will continue to receive retirement income if the annuitant dies.
Life with Period Certain
The life with period certain payout option guarantees the annuity payments will continue for a minimum period of time. The period certain is often 10 years, but may be 15 or 20. If the annuitant dies before the period certain is up, his beneficiaries will continue to receive the payments until the time period runs out. If the annuitant lives longer than the set period, the payments stop when he passes away.
The refund payout option guarantees that either the annuitant or her beneficiaries will receive total payouts equal to at least the value of the account when the payouts start. This option appears similar to the life with period certain option. If the annuitant dies before the total amount received exceeds the starting value of the retirement account, the beneficiary will continue to receive checks until the amount is reached.