When the owner annuitizes a deferred fixed annuity or purchases an immediate annuity, he or she will need to choose the form of payout. Choices generally include:
Straight life: Lifetime payments that feature the highest payout, but end at the annuitant's (the person receiving the payment) death, with no payments to a beneficiary.
Life with period certain: Lifetime payments that are guaranteed for at least a certain number of payments, with any remaining payments made to a beneficiary after the death of the annuitant.
Joint and Survivor: Payments cover two lifetimes, and the amount depends on whether and how much the owner chooses to reduce the payment after the first death.
Installment refund: Lifetime payment. At the death of the annuitant, if the balance of the original investment has not been paid out, payments continue to a beneficiary until the original investment is depleted.
Fixed Period or Amount: Payment of a fixed monthly amount that ends when the balance is depleted, or payment is made for a fixed period only. In either case, upon death of the annuitant, remaining payments would be made to a beneficiary.
These are choices that can wait until it is time to begin the payout phase, which can be deferred typically until at least age 85 (unless the annuity is in an IRA or qualified retirement plan). You can also make earlier periodic withdrawals from a deferred annuity without annuitizing (subject to early withdrawal penalties and surrender charges, if any).
IMPORTANT NOTE: It is essential to understand that once the decision is made to annuitize, you are relinquishing control of your money to the insurance company. Generally, in exchange for the company's promise to pay you income based on the option you have chosen, you can no longer withdraw a lump-sum amount or change your payout schedule. Although it is possible to potentially have a guaranteed income for life with a fixed annuity, there is no assurance that this income will keep up with inflation.