What Is A Single Life Annuity (Definition and Payout Option)

There are many types of annuities and annuity payouts to consider when retirement planning.

One of these is a single life annuity. A single life annuity can provide you with retirement income for the rest of your life.

Of all types of annuities, the single life annuity offers the highest monthly payout.

This makes it an appealing choice to those considering an annuity, but is it right for you?

This article explains what a single life annuity is, who it's best for, as well as some single life annuity alternatives.

Although a single life payout option is available on a deferred annuity, for the purposes of this article we will only be discussing a single life payout option selected on an immediate annuity.

Single Life Annuity Definition

A single life annuity is a specific type of annuity product and defines a way to structure your annuity payments. Single life annuities are an attractive annuity payout option because they offer the highest monthly payouts of all the payout options.

Annuity payments are higher for single life annuities than they are for joint life annuities. That's because the payments are meant to last for the lifetime of the annuity owner or annuitant. Joint life annuities, on the other hand, last for the lifetimes of two people.

Guaranteeing payouts for two people’s lifetimes is more risky for the insurance company than the same guarantee covering a single life and for that reason, single life payouts are higher than joint life payouts.

While the higher monthly payments are a unique benefit of the single life annuity, there is one big drawback: The monthly payments stop when the annuitant dies.

There are no death benefits with a single life annuity. This can be a problem if the annuitant has a spouse who also depends on the annuity payments.

For this reason, single life annuities are not always the best choice for married people. A joint life annuity may not pay as much each month, but it's meant to last for a longer period of time. And a joint life annuity continues payments to the surviving spouse if one spouse dies (albeit at a lower monthly amount or a lump-sum payment).

Who Is a Single Life Annuity Best For?

A single life annuity payout option may be right for you based on the following factors:

• Your marital status, age, and health. If you are single, younger than age 70, and in good health, a single life annuity may work best for you. This is because you have no spouse who needs death benefits; you're young, so you can get the most out of your payments; and you can be expected to live a long time because of your good health.
• The overall health and life expectancy of your spouse. If your spouse is in poor health or is significantly older than you, then a single life annuity may be a good choice. Consider a single annuity option over other plans that continue fixed income payments after you die.
• Sufficient other sources of retirement income. Do you or your spouse have other assets (including social security and pension benefits) that can provide enough retirement income? If so, it may make sense to choose the larger single life annuity retirement benefit. With sufficient income from other sources, your spouse may not need guaranteed income from an annuity after you die.
• Your sex and spouse's sex. If you are a woman married to a man, then selecting a single life annuity payout may make more sense than selecting other plans that continue income payments after you die. That's because, all other factors being equal, women are statistically more likely to outlive men of the same age. You will benefit from the higher monthly payout under the single life annuity while you are alive. By contrast, if you select a joint life option and your spouse dies first, you may be left with a smaller payout for the rest of your life.

Who Might Not Benefit From a Single Life Annuity?

Conversely, you may consider other payout options if one or more of the following applies to you:

• You are married and would like your spouse to continue receiving payments after your death.
• You have a favorite charity and want them to receive annuity payments after your death.
• You are older, have a shorter life expectancy or are in poor health.

What are Other Payout Options?

If you decide a single-life annuity isn't right for you, that's okay!

Life insurance companies offer other distribution options for your annuity.

Life With Period Certain

With a single life annuity, you risk losing the annuity money if you die earlier than expected.

To avoid this risk, you can add a "period certain" feature to the single life option.

With this feature, the annuitant receives payments, either for their entire life or for a certain period that the owner chooses—whichever is longer.

For example, suppose the annuity owner chooses a single life annuity with a 20-year period certain option.

The payments last for at least 20 years, whether or not the annuitant dies during this period.

But if the annuitant lives for more than 20 years, payments continue for as long as they are alive.

This feature can provide peace of mind to annuitants that they have a guaranteed payout period. However, it's important to note that period certain payments will be smaller than single life payments without a period certain payment attached.

Joint Life

Some annuity buyers want to provide income for themselves and someone else, like a spouse or sibling.

That's where a joint life annuity can help. A joint life annuity option (also called a "joint and last survivor annuity option") provides income as long as either person identified in the contract is alive.

The joint and last survivor option provides smaller payouts, like the life with period certain option because of the guarantee that payments will continue until both participants die.

Period Certain

The final common option is the period certain payout. Period certain provides guaranteed retirement income for a specific time without the possibility of receiving lifetime payments.

Essentially, period certain instructs the insurance company to pay the annuitant for a specific number of years.

The longer the annuitant selects to receive payments, the smaller the monthly amount will be and vice versa.

You might choose this option when you have short-term expenses like loans to pay off and need the largest annuity payout for a specific period of time.

Other Annuity Payout Options

Your insurer may provide you with other payment options, including lump-sum payout options or death benefit provisions. Just make sure you get a complete rundown of all of your options from your agent or financial advisor, so you are completely informed.

Is a Single Life Annuity a Good Choice?

As you might guess, a single life annuity is not among the most popular payout annuities. Because of its limiting features and the fact that there is no cash value to pass on when the annuitant dies, most people choose other payout options for their immediate annuity.

The longer a single retiree lives, the more this product makes sense. But if your intent is to continue payments to a spouse or other beneficiary after death, a single life annuity is not the best choice. Compare all the annuity plans you are considering in order to find the best fit for you.

Fortunately, insurance companies offer many annuity payout options and death benefit provisions. 

Be sure to ask specific questions of your agent or financial advisor based on your personal financial situation. Looking to save for retirement?

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Citations

1. CNN Money -- What's the difference between a single-life annuity and a joint-and-survivor annuity?
2. LGE Community Credit Union -- The Basics of Traditional Pension Plans
3. What is a Single Life Annuity? -- Smart Asset