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

    How to Use Annuities for Retirement Income

    We explain how to use annuities for guaranteed income in retirement.
  3. 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.
  4. 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.
  5. 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.
  6. Financial Advisor

    Advising FAs: Explaining Annuities to a Client

    Conceptually speaking, annuities can be thought of as a reverse form of life insurance.
  7. 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 ...
  8. Retirement

    How a Fixed Annuity Works After Retirement

    These popular investments can provide a steady stream of income during your retirement years. Here are the details.
  9. Retirement

    What Role Should Annuities Play in Retirement?

    Fixed annuities can provide income protection for those worried about outliving their assets. But don't buy a bigger policy than you really need.
  10. Retirement

    Immediate Annuities: What To Watch Out For

    Immediate annuities can provide substantially higher monthly payouts than other fixed-income instruments, but also have some key limitations.
RELATED FAQS
  1. What are the distribution options for an inherited annuity?

  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. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  2. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
  3. Sell-Off

    The rapid selling of securities, such as stocks, bonds and commodities. The increase in supply leads to a decline in the ...
  4. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  5. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  6. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
Trading Center