STRAIGHT LIFE ANNUITY: Definition, Payout Options & Alternatives

straight life annuity

A straight life annuity will benefit single retirees with no heirs the most. These annuities guarantee payments for the rest of the annuity’s life, and the payouts are greater because the annuity does not have to continue paying income to a surviving spouse or other dependents. A straight life annuity guarantees you a stream of income for the rest of your life, but those payments stop when you die. There is usually no death benefit or ongoing payments for any heirs. Straight life annuities may not be the ideal solution for people who want to financially assist their families after they die. Learn more about straight life annuity payout options and who benefits from them.

What Is a Straight Life Annuity?

A straight life annuity is a form of annuity that pays the annuitant for the rest of their life. Straight life annuities do not have an expiration date or time limit and often pay out monthly, quarterly, semi-annually, or annually. Annuities are one way to make your money work for you and offer a consistent income stream throughout retirement.

How a Straight Life Annuity Works

While many types of annuities allow the annuitant to choose a beneficiary (typically a spouse) who will be entitled to either continued payments or death benefits, a straight life annuity foregoes this added advantage in favor of higher assured payments while the annuitant is alive.

This policy can be purchased over the length of the annuitant’s working life by making periodic payments into the annuity, or it can be purchased with a single lump-sum payment. Typically, lump-sum purchases are done at or shortly after the annuitant’s retirement. Either payment method will result in the same recurring payments.

The owner can receive the largest monthly payment by excluding the survivor and death payments. As a result, such an annuity is best suited to persons who do not have a spouse or partner.

In effect, it is a straight gamble on life; the longer the owner/annuitant lives, the more money they will get in payments. It makes no provision for mitigating risk in the event of early death, in which case the annuity writer keeps the amount. Straight life annuities may not be the ideal option for couples who rely on the annuity’s retirement income.

Straight life annuities, like other annuities, provide life insurance.

In such a circumstance, the surviving spouse would need to have another source of income, most likely another annuity. Straight life annuities may not be a desirable option for people who want to leave their money to heirs.

Straight Life Annuities: Pros and Cons

Is it a good idea to get straight life annuities? The answer is dependent on your specific circumstances. However, to assist you in making this decision, here are the advantages and disadvantages of straight life annuities.


  • Retirement income is guaranteed

Annuitants receive a guaranteed income for the rest of their lives when they retire.

  • Payouts are higher.

Straight life annuities do not have a beneficiary component. When the annuitant dies, the payments stop. As a result, the annuity business can offer bigger payouts. Straight life annuities often provide the highest payout of all annuity options.


  • There will be no death benefits.

The insurance company does not make any remaining payments from your annuity upon your death. As a result, your beneficiaries are disqualified, and your survivors will receive nothing. In short, people in need of a legacy planning tool should avoid this form of an annuity.

  • You could lose money.

When you die, your beneficiaries are not entitled to anything if the annuity payments you have received are less than the account value. As a result, if you die before breaking even, you are likely to lose money.

Straight Life Annuity Payout Options

Straight life payout possibilities can be paired with the majority of other annuity kinds. These annuities, for example, provide a life payout option.

You normally don’t get to choose your annuitization option until you decide to annuitize. As a result, when it comes time to receive income from an annuity, you can select the straight life annuity payout choice that works best for you.

  • Straight Life Immediate Annuity: Because of the significant investment you made, you begin getting payments fairly soon after acquiring this form of an annuity.
  • Straight Life Deferred Annuity: A straight-life annuity is one that has time to grow and earn interest.
  • The Straight Life Variable Annuity: The payment amount is determined by the investment portfolio with this annuity.
  • Straight Life Fixed Indexed Annuity: This is a type of fixed indexed annuity. Consider this a hybrid annuity that provides principal protection while also being tied to an index, such as the Nasdaq.
  • Straight Life Fixed Annuity: Your annuity’s interest rate will be fixed, making it a more predictable and secure investment alternative.
  • The Straight Life Annuity with a Single Premium: This straight life annuity is funded by a one-time lump-sum payment.
  • Straight Life Annuity with Variable Premiums: A straight life annuity can be funded by making a series of premium payments over time.

Straight-life annuities come in a variety of flavors, each with its own set of risks and potential payouts. Which one is best for you will be determined by your financial status and retirement aspirations.

Best Candidates for Straight Life Annuities

Straight life annuities are best suited to single persons who do not have a spouse or any dependents. In other words, you’re not aiming to pass down generational riches.

Those who have other income and assets, whether married or single, who plan to deposit only a portion of their retirement nest egg into the annuity may also find the single-life annuity suitable. The guaranteed income provided by the annuity formula enables an individual to invest more proactively with the remainder of his or her portfolio in order to pursue a potentially higher return. The annuity also guarantees a minimum level of income regardless of how the market performs.

If you have children but have already set aside other assets for them, a straight life annuity is an option to explore.

According to studies, when a retirement nest account is part of an annuity that pays income for life, the nest egg lasts longer than when it isn’t. Many financial consultants recommend that seniors get guaranteed income from Social Security and annuities that at least meets their set, needed expenses during retirement.

When Is a Straight Life Annuity Beneficial to Married Couples?

Married persons typically choose an annuity that is arranged in such a way that it can continue to give income to the surviving spouse after the annuitant holder dies.

However, if a married person has another source of income, it may make sense for him or her to purchase a straight life annuity. This allows the annuity bearer to optimize retirement income without having to worry about leaving a surviving spouse with little to live on.

How Much Does a Straight Life Annuity Cost?

Straight life annuities, like other annuities, can be funded to any amount.

You will receive more income in your payouts if you donate more money through premium payments. Annuities are often supported by your savings or your IRA. Other alternatives include selling stocks, mutual funds, or even the surrender value of a life insurance policy.

Is a Straight Life Annuity Taxable?

Yes, in a nutshell.

A straight life annuity, like all annuities, is tax-advantaged. A straight life annuity grows tax-deferred, which means you don’t pay taxes until you receive the income. As a result, your account worth will grow faster. However, most people pay taxes in retirement as a result of this.

However, due to their decreased salaries in retirement, the majority of persons fall into a lower tax rate. That is, paying your annuity taxes in a lower tax band will result in reduced overall taxes.

Alternatives to Straight Life Annuity

If you aren’t a good candidate, your family has alternative options for guaranteed retirement income besides a straight life annuity.

#1. Cash Refund Rider

Although not strictly an alternative to a straight life annuity, a cash refund rider allows you to customize your annuity in order to leave a benefit to a loved one if you die. After payouts are subtracted from the premiums paid, any residual balance is distributed to the beneficiary.

While it protects your beneficiary from longevity risks by ensuring that no premium is squandered, it may be liable to taxation when the payout is issued.

#2. Period Certain Annuity

A period-specific annuity, like a cash refund rider, may offer funds to your beneficiaries in the event that you die unexpectedly. Your beneficiaries will be eligible for annuity payouts for a set length of time (typically 10 to 20 years).

However, if you outlive the period, no rewards will be provided. Those who are well into retirement or have health concerns that limit their longevity may profit from this, as their life expectancy may be much reduced. Be advised that benefit recipients may be required to pay taxes on their inheritances.

#3. Life Plus Period Certain Annuity

With this option, you can get a lifetime payout from a straight life annuity while also having the option to leave leftover premium payments to a beneficiary. Essentially, it’s a hybrid product with a set payout duration (typically 10-20 years) or for the life of the consumer, whichever comes first. There may be tax repercussions.

#4. Joint-to-Survivor Annuity

If your spouse does not have another source of income, joint-to-survivor annuities payout out regardless of who dies first. By doing so, a spouse will no longer be left without retirement income or financial support if one of you dies. Those without dependent children, who aren’t concerned with handing down their fortune, or whose beneficiaries hold other assets can benefit from this alternative.

With joint-to-survivor annuities, you can arrange for payouts to be at least 25-50 percent higher while both you and your spouse are still alive, and to be decreased once one of you dies. This might assist you in getting the most out of your annuity payouts. Furthermore, some insurance firms pay more benefits if the survivor is a spouse, as opposed to other beneficiaries.

#5. Whole Life Insurance

Do you wish to leave a legacy of wealth to future generations? Or do you wish to help your dependent financially? If you answered yes to either question, you should consider purchasing a whole life insurance policy. The plan not only guarantees a guaranteed death benefit but also a guaranteed rate of return and dividend possibility. You can use these earnings for tax-free retirement income or for other purposes. It provides the highest assurances and is the least volatile of the several types of permanent life insurance.

Straight Life Annuity FAQs

Can you cash out a straight life annuity?

Structured settlements and annuity payments, on the other hand, can often be cashed out at any time. You can sell some or all of your future structured settlement payments immediately in return for cash.

Can you outlive a straight life annuity?

Straight life annuities, unlike permanent life insurance, do not provide a death payout to your beneficiaries. They payout until you die, at which point the payments cease. In other words, a straight life annuity delivers consistent income that cannot be outlived.

Which annuity has the highest monthly payout?

Because the monthly payment is predicated only on the annuitant’s life, the life option often delivers the greatest payout. This option provides a lifetime income stream, which serves as an excellent buffer against outliving your retirement income.

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