Annuitization is the step of turning an annuity's accumulated value into regular income payments. You choose a payout option — such as life only, life with a guaranteed period, or joint life — which determines how long payments last and whether a beneficiary can receive remaining value.
Once annuitized, the payout is generally irrevocable, and the income is backed by the claims-paying ability of the issuing insurance company and is not FDIC insured. Many modern contracts also offer income through a rider without full annuitization.
Example
A retiree annuitizes a deferred annuity using a 'life with 10-year certain' option, guaranteeing payments for life and at least 10 years to a beneficiary if they pass early.
This definition is for general educational purposes only and is not financial, tax, or legal advice. Tim Hartle is an independent insurance professional. Annuity guarantees are subject to the claims-paying ability of the issuing insurance company and are not FDIC insured. Rules and product features vary by situation and by state. Please consult a qualified advisor about your own circumstances.