Lifetime Income Annuities
Jason Stolz CLTC, CRPC
For many retirees, the biggest financial fear isn’t market volatility—it’s the possibility of outliving their savings. A lifetime income annuity is one of the few financial tools that can eliminate that concern entirely by guaranteeing income that continues every month for the rest of your life. Whether you live to 72 or 102, the check never stops. This makes lifetime income annuities a core foundation of retirement planning for individuals who want predictability, stability, and long-term security.
Lifetime income annuities come in several forms, but all share the same purpose: converting a portion of your retirement savings into a guaranteed stream of income. This predictable income can complement Social Security, fill gaps left by reduced pensions, or serve as the primary source of reliable monthly cash flow in retirement. At Diversified Insurance Brokers, we help retirees analyze how much income they need, when they need it, and how different annuity structures impact their long-term plan.
Why Retirees Choose Lifetime Income Annuities
The appeal of guaranteed lifetime income grows stronger as retirees see the effects of market downturns, rising longevity, and uncertainty around future interest rates. Unlike investments that fluctuate or accounts that eventually run down, income annuities shift longevity risk onto the insurance company. This means your income is protected even if you exhaust the entire contract value.
For example, imagine a retiree named Mark who enters retirement with $600,000 between a 401k rollover and savings. He wants $3,000 per month in predictable income to cover essential expenses. Social Security provides $2,100. By placing $180,000 into a lifetime income annuity, Mark secures an additional $1,000 per month for life, closing his income gap permanently. The remainder of his savings stays available for liquidity, growth, or emergencies.
How Lifetime Income Annuities Work
Lifetime income annuities function much like a personal pension. When you fund the annuity—either with a lump sum or qualified retirement rollover—the insurance company calculates your guaranteed monthly payout based on factors like age, gender, interest rate environment, contract bonuses, and whether you choose single-life or joint-life income.
Retirees typically choose between two broad categories: immediate income and deferred income. An immediate income annuity begins payments right away, often within 30 days. A deferred income annuity provides guaranteed income beginning at a future date, allowing the annuity to accumulate bonuses or roll-up growth during the deferral period.
Some people prefer the strong payout benefits of traditional income annuities, while others choose a fixed indexed annuity with a lifetime income rider because it provides flexibility, accumulation potential, and the option to delay income for higher payouts later. You can learn more about fixed indexed annuities here: How Does a Fixed Indexed Annuity Work?
Single-Life vs. Joint-Life Income Options
Retirees can customize their income based on their household needs. A single-life income annuity pays the highest monthly amount because payments end at the individual’s death. A joint-life income annuity pays slightly less per month but continues to pay a surviving spouse for as long as they live. For couples who rely on dual income, joint-life payments create long-term stability and peace of mind.
Consider Linda and Robert, both age 67. If they purchase a joint-life income annuity using $250,000 from their accumulated savings, the annuity may provide around $1,050 per month for both of their lifetimes. Even if one spouse lives 35 more years, that income continues uninterrupted.
How Taxes Affect Lifetime Income
The taxation of lifetime income depends on whether the annuity is funded with qualified or non-qualified money. A qualified lifetime income annuity—funded with a rollover from a 401k or IRA—creates fully taxable income since the contributions were made pre-tax. A non-qualified annuity, funded with after-tax dollars, receives favorable exclusion-ratio treatment in the early years. You can review more on this topic here: How Annuities Are Taxed in Retirement.
Many retirees choose to combine both sources so they can balance predictable taxable income with partially tax-free payments depending on the source of funds.
Coordinating Guaranteed Income With Your Retirement Plan
A lifetime income annuity works best when integrated into a broader retirement income strategy. Many retirees use the annuity to create a “floor of safety”—income that covers housing, groceries, healthcare, and essentials. With these costs covered, other retirement assets such as IRAs, mutual funds, or brokerage accounts can be used more strategically for discretionary spending or growth. This structure helps protect investment accounts from being drained during market downturns, ultimately making savings last longer.
Lifetime income annuities also pair well with rollovers from employer plans. If you retire with a pension, TSP, 401k, 403b, or deferred compensation account, you may consider transferring a portion into a guaranteed income product to secure your essential spending for life. You can explore rollover steps here: What Is a Direct Rollover?
See Your Guaranteed Income Options
The calculator below allows you to estimate exactly how much monthly income your annuity could provide based on your age, premium amount, and income rider options.
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FAQs: Lifetime Income Annuities
What is a lifetime income annuity?
A lifetime income annuity converts savings into guaranteed monthly payments that continue for as long as you live, similar to a personal pension.
How much income can I receive?
Income depends on age, premium amount, interest rates, and whether the contract includes bonuses or a deferral period. Older retirees generally receive higher payouts.
Can income continue for my spouse?
Yes. Joint-life income annuities continue payouts for the lifetime of both spouses, making them ideal for couples who rely on shared income.
Is lifetime income taxable?
Yes, but taxation depends on how the annuity was funded. Qualified annuities generate fully taxable income, while non-qualified annuities receive exclusion-ratio treatment.
What happens if I live longer than my account value?
Your income continues unchanged. Once the account value is exhausted, the insurance company continues paying for the rest of your life.
Can lifetime income increase over time?
Some annuities offer optional income riders that increase payouts based on deferral bonuses or cost-of-living adjustments.
About the Author:
Jason Stolz, CLTC, CRPC, is a senior insurance and retirement professional with more than two decades of real-world experience helping individuals, families, and business owners protect their income, assets, and long-term financial stability. As a long-time partner of the nationally licensed independent agency Diversified Insurance Brokers, Jason provides trusted guidance across multiple specialties—including fixed and indexed annuities, long-term care planning, personal and business disability insurance, life insurance solutions, and short-term health coverage. Diversified Insurance Brokers maintains active contracts with over 100 highly rated insurance carriers, ensuring clients have access to a broad and competitive marketplace.
His practical, education-first approach has earned recognition in publications such as VoyageATL, highlighting his commitment to financial clarity and client-focused planning. Drawing on deep product knowledge and years of hands-on field experience, Jason helps clients evaluate carriers, compare strategies, and build retirement and protection plans that are both secure and cost-efficient.
