What Is an Annuity Period?

Annuities are insurance contracts where you pay a premium upfront for future payments that return your principal plus interest. They can help boost your retirement income, but before buying one, make sure you learn the key terms. One important term is the annuity period, which refer to when payments begin. Knowing how it works can help you choose the right annuity for your situation. For more help with annuities, consider working with a financial advisor.

Annuity Period, Defined

The annuity period is the time when an annuitant (person who owns the annuity) starts to receive payments. This is generally in retirement, and payments can come monthly, quarterly or annually. The exact details of the annuity period for your specific annuity will have been determined in the contract you signed when purchasing your annuity earlier in your life.

An annuity period can either be specific or open-ended. For instance, some annuities pay for the duration of a person’s life once the annuity period begins. Other annuities have a specific annuity period, perhaps 10 years. Again, these details come into play back when you buy your annuity contract. This also has an impact on how much of a premium you paid during that portion of your annuity contract.

How Annuity Periods Work

When your annuity period begins, you’ll receive payments on a set schedule based on your contract terms.

When the annuity period arrives for your annuity contract, you’ll start to receive money on a predetermined schedule. Again, the exact nature of your annuity period will go by the stipulations in annuity contract you purchased.

First, there is the determination of what your annuity payment will be. This is based on whether you bought a fixed annuity or a variable annuity. If you purchase a fixed annuity, your payments are predetermined and guaranteed when you buy the contract. On the other hand, the payouts for a variable annuity come from the market performance of the money you invest during your buy-in phase.

Beyond this, the factors related to your annuity period payout are determined based on the specific annuity product you buy:

Period annuity. A period annuity is for a specific amount of time, such as five, 10, 15 or 20 years. During that period, you receive a payout either monthly, quarterly or annuallyly for the length of that period.
Lifetime annuity. You can purchase a lifetime annuity that pays out for the rest of your life. These types of annuities are especially useful for retirement planning, as they can ensure payouts for as long as you live – even if you live longer than expected and your other retirement savings are depleted.
Joint-life annuitization option. A joint-life annuitization option can be beneficial for a couple, as it continues payouts until both members of the partnership have died.
Lifetime annuity with guaranteed term. A guaranteed lifetime annuity pays out for life but also has a guaranteed term. Let’s say you purchase a lifetime annuity with a 10-year term but die just five years into the annuity period. In this case, your estate or surviving spouse will continue to get payments until the 10-year period is over.

Factors That Influence Annuity Payments

The income you receive from an annuity depends first on how much you contribute and when you make those contributions. A larger lump sum or a series of higher payments will naturally result in larger future payouts, while smaller or irregular contributions will lower the eventual stream of income. Timing also matters, since the earlier you begin funding an annuity, the longer your money has to grow before the payout phase begins.

The prevailing interest rates at time of purchase also play a significant role in determining the size of your payments. When rates are higher, insurance companies can invest premiums in ways that support larger payouts. When rates are lower, contracts generally offer smaller guaranteed income streams, even if the initial premium amount is the same.

Your age and expected lifespan are other factors. Younger buyers who begin annuity contracts early usually receive smaller regular payments because the income is expected to last for a longer period of time. Older buyers may see larger payouts because the insurer calculates payments for a shorter expected horizon. Life expectancy estimates are central to how insurance companies structure annuity contracts.

Optional features, such as death benefits, inflation protection or guaranteed payment periods, also influence what you ultimately receive. While these riders can add valuable protections, they come at the cost of reducing the base payment amount.

Choosing which features to include requires weighing the importance of stability and security against the goal of maximizing income.

How to Choose the Right Annuity Period

Selecting an annuity period is not just about how long payments last. It should reflect several factors, including your retirement timeline, health outlook, family needs and other income sources.

If you already have guaranteed income from Social Security or a pension, you may prefer a shorter annuity period to increase cash flow in your early retirement years. If your main concern is outliving your savings, a lifetime annuity may be a better fit.

Couples often find value in joint-life annuities because they continue payments until both spouses have passed. Meanwhile, individuals who want to leave something behind may prefer a lifetime annuity with a guaranteed term, allowing their heirs to keep receiving payments for a set period. Optional features, such as like inflation protection, can also help maintain purchasing power if you expect a long retirement.

The right choice depends on how much security, flexibility and legacy planning you require.

Comparison of Annuity Period Options

Annuity Period Type	How It Works	Best For	Trade-Offs
Lifetime	Pays as long as you live	Individuals concerned about outliving savings	No remaining benefits for heirs after death
Period-Certain (5, 10, 20 years)	Pays for a fixed number of years	Retirees seeking predictable income for a set time	Payments stop after the term ends, even if you live longer
Joint-Life	Pays until both spouses have died	Married couples who want survivor protection	Lower payments compared to single-life annuities
Lifetime with Guaranteed Term	Pays for life, with a minimum guaranteed term (e.g., 10 years)	Individuals who want lifelong income plus benefits for heirs	Payments are smaller because of the guarantee
Lifetime with Inflation Protection	Payments increase each year with inflation	Retirees worried about long-term purchasing power	Starting payments are lower

Is an Annuity Right for You?

Annuities provide steady income in retirement, helping you manage expenses and maintain financial stability.

Annuities can be a helpful part of retirement planning because they provide a guaranteed stream of income after you stop working. This steady payout can make it easier to manage expenses and maintain financial stability throughout retirement.

While annuities offer security, they also come with trade-offs. Variable annuities can be affected by market performance, which may reduce payments. In general, annuities tend to have less growth potential than other investments, but they also carry lower risk.

If you are thinking about adding an annuity to your retirement plan, consider how it fits with your savings, goals and other income sources. A financial advisor can help you evaluate your options and decide whether an annuity is a good fit for your overall investment strategy.

Bottom Line

The annuity period is the time when an annuity actually pays out to an annuity holder. The annuity period can last a specific amount of time or it can last for the rest of a person’s life. You fund an annuity earlier in life through one or more premium payments and guarantee income later in life. This makes them popular products with some retirement planners.

Retirement Planning Tips

For help with annuities or any other retirement planning questions, consider working with a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
The first step to retirement planning is often using a workplace retirement savings account. If you have access to a 401(k) or similar plan, make sure you take advantage.