Lifetime Payout Annuity

AAA

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.

INVESTOPEDIA EXPLAINS '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. Annuity

    A financial product that pays out a fixed stream of payments ...
  2. Annuity Certain

    A financial instrument that provides a stream of payments, for ...
  3. Fixed Annuity

    An insurance contract in which the insurance company makes fixed ...
  4. Annuity Contract

    The written agreement between an insurance company and a customer ...
  5. Variable Annuity

    An insurance contract in which, at the end of the accumulation ...
  6. Life Annuity

    An insurance product that features a predetermined periodic payout ...
RELATED FAQS
  1. Is Social Security Income a perpetuity?

    Because Social Security income does not continue indefinitely, it cannot be classified as a perpetuity. What Is a Perpetuity? A ... Read Full Answer >>
  2. What kinds of costs are included in Free on Board (FOB) shipping?

    Free on board (FOB) shipping is a trade term published by the International Chamber of Commerce or ICC, that indicates which ... Read Full Answer >>
  3. How do insurance companies use a whistleblower?

    Fraudulent claims are among the most prevalent and serious business risks that insurance companies face. Many consumers have ... Read Full Answer >>
  4. How is maintenance of standard of living for survivors accomplished in estate planning?

    Estate planning is an integral component of comprehensive financial planning, as it allows individuals and couples to maintain ... Read Full Answer >>
  5. What options strategies are best suited for investing in the insurance sector?

    Three segments comprise the insurance sector. The largest, property and casualty insurance, exhibits significantly less volatility ... Read Full Answer >>
  6. Why should value investors consider the insurance sector?

    Insurance companies receive steady cash flows for years with irregular payouts. Following these payouts, insurance companies ... Read Full Answer >>
Related Articles
  1. Budgeting

    Managing Income During Retirement

    Learn some sensible strategies for making your hard-earned savings last for as long as you need them.
  2. Bonds & Fixed Income

    Explaining Types Of Fixed Annuities

    Learn about this popular retirement tool, its pros and cons and how annuities work to create a guaranteed regular stream of retirement income.
  3. Home & Auto

    An Overview Of Annuities

    These contracts provide a guaranteed income stream. Learn how they work and their benefits.
  4. Options & Futures

    Selecting The Payout On Your Annuity

    Make sure you understand your options for withdrawing your funds from this complex instrument.
  5. Options & Futures

    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.
  6. Options & Futures

    Variable Annuities: The Do-It-Yourself Pension Plan

    Variable annuities can cost more than mutual funds, but that might be worth the protection they can add to your retirement.
  7. Options & Futures

    New Option For Beneficiaries: Reversionary Annuities

    This vehicle can provide survivors with guaranteed income and lower premiums.
  8. Insurance

    Who Needs Extortion Insurance?

    Insurance can help mitigate the financial damage of an extortion plot, but it’s important to read the fine print before taking out one of these policies.
  9. Insurance

    Indexed Universal Life Insurance: The Pros & Cons

    What you need to know, to see if these vehicles fit into your financial plan.
  10. Professionals

    Pension Annuity vs. Lump Sum: Which is Best?

    Which pension distribution option best serves your client, a pension annuity or a lump-sum payout?

You May Also Like

Hot Definitions
  1. Inbound Cash Flow

    Any currency that a company or individual receives through conducting a transaction with another party. Inbound cash flow ...
  2. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  3. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  4. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  5. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  6. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!