Lifetime Payout Annuity

DEFINITION of 'Lifetime Payout Annuity'

A type of insurance product that pays out a portion of the underlying portfolio of assets over the life of the investor. A lifetime payout annuity can provide fixed or variable payments. In a fixed payout scheme, the investor receives a fixed dollar amount for each payment, potentially with cost of living adjustments (COLA). Payouts under a variable payout scheme will fluctuate because payments are based on the value of the investments held in the annuity's portfolio.

BREAKING DOWN 'Lifetime Payout Annuity'

Investors may choose a lifetime payout annuity to head off the risk of outliving the amount of money set aside for retirement. Basically, the guaranteed payments for life reduce a person's longevity risk. However, this payout scheme can cause problems for those wanting to leave estates to heirs. Payouts from a lifetime payout annuity typically end with the death of the policyholder. The policyholder can purchase adjustments which allow payments to continue to an estate or which allow for a guaranteed number of payments, but these can result in a different payout.

RELATED TERMS
  1. Payout

    The expected financial return from an investment over a given ...
  2. Payout Ratio

    Payout ratio is the proportion of earnings paid out as dividends ...
  3. Valuation Period

    The time between the end of the business day of the first business ...
  4. Annuity

    A financial product that pays out a fixed stream of payments ...
  5. Single-Life Payout

    One of two payout option methods an employer uses to distribute ...
  6. Charitable Gift Annuity

    A type of gift transaction where an individual transfers assets ...
Related Articles
  1. Trading

    Selecting The Payout On Your Annuity

    Make sure you understand your options for withdrawing your funds from this complex instrument.
  2. Retirement

    Immediate Annuities: Guaranteed Payout At A Price?

    This vehicle can have very low, or even negative, rates. Find out when it pays to invest.
  3. Retirement

    How to Use Annuities for Retirement Income

    We explain how to use annuities for guaranteed income in retirement.
  4. Trading

    Lifetime Income Annuities: The Instant Pension Plan

    If you are looking for a retirement play with a guaranteed structure payout, lifetime income annuities could be the answer.
  5. Retirement

    How a Variable Annuity Works After Retirement

    These investments can provide extra income after you retire. Here’s a guide to when and how you will receive the payout.
  6. Retirement

    Retirement Tips: Choose the Best Annuity Provider

    It pays to get the best advice if you are thinking of putting your money into one of these complicated investments.
  7. Retirement

    Are Annuities Retirement-Only Investments?

    Learn more about why annuities are generally purchased and the way that they can positively and negatively affect an individual preparing for retirement.
  8. Markets

    What Is the Best Age to Get an Annuity?

    Optimizing the benefits of an annuity means guaranteeing a stream of income you can't outlive.
  9. Financial Advisor

    Advising FAs: Explaining Annuities to a Client

    Conceptually speaking, annuities can be thought of as a reverse form of life insurance.
  10. Retirement

    Is Annuitization Your Best Strategy?

    Annuitization has traditionally offered annuity owners a stream of income they cannot outlive, but there are some disadvantages to this form of payout. Consider alternatives, such as income-benefit ...
RELATED FAQS
  1. What percentage of my total portfolio (approx. $1.2 M in assets) should be invested ...

    I recently rolled over a portion of my 401k into a variable annuity. I am considering rolling over additional money, since ... Read Answer >>
  2. What are the main kinds of annuities?

    Learn about the four basic types of annuities, and why the different investment and payout options are suitable for different ... Read Answer >>
  3. What is the difference between a fixed and variable annuity?

    Understand the difference between fixed, variable and indexed annuities, and read a brief summary of their respective risks ... Read Answer >>
  4. What is pension maximization?

    Pension maximization refers to a strategy for choosing a payout option at the time of your retirement. Employees near retirement ... Read Answer >>
  5. For what types of investments is the payout ratio the most relevant?

    Find out about the payout ratio, what the payout ratio measures and the type of investment that the payout ratio is used ... Read Answer >>
  6. What is an annuity?

    An annuity is a contract between you and an insurance company in which you make a lump sum payment or series of payments ... Read Answer >>
Hot Definitions
  1. Quantitative Trading

    Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify ...
  2. Bond Ladder

    A portfolio of fixed-income securities in which each security has a significantly different maturity date. The purpose of ...
  3. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  4. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  5. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  6. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
Trading Center