Guaranteed lifetime income is money that is paid to you on a regular schedule for as long as you live, no matter how long that is. Common sources are Social Security, traditional pensions and income from an annuity issued by an insurance company. Annuity guarantees depend on the financial strength and claims-paying ability of the insurer that issues the contract.
Written and reviewed by Dan Hopwood, Retirement Income Specialist · Retirement Income Knowledge Center · Last reviewed
When you retire, your paycheck stops but your bills do not. Savings can be spent down, and nobody knows exactly how long they will live. Income that is promised for life removes one big unknown: the risk of outliving your money.
Income that lasts for life also makes budgeting easier. You know roughly what will arrive each month, so you can match it against your essential bills.
In this example, the retiree knows that $700 a month of essential spending still depends on savings. Some people are comfortable with that. Others look for ways to cover the rest with more dependable income.
Illustration only. It shows the idea of comparing essential bills with lifetime income. It is not a recommendation to buy any product.
Guaranteed income usually means giving up some flexibility. Money used to buy annuity income may not be fully available for other uses, and many annuities have surrender charges for early withdrawals. Guarantees are backed by the issuing insurance company, not by the government. Understanding these trade-offs is part of deciding how much lifetime income makes sense for you.
| Source | Who pays | Adjusts for inflation? |
|---|---|---|
| Social Security | Federal government | Yes, yearly cost-of-living adjustment |
| Traditional pension | Employer plan | Depends on the plan |
| Lifetime annuity income | Insurance company | Only if the contract includes it |
General comparison; check your own statements and contracts for exact terms.
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Social Security retirement benefits are paid monthly for life once you start them, and they generally receive a yearly cost-of-living adjustment. Benefit rules are set by law and can change in the future.
The insurance company that issues the annuity. Guarantees are subject to that company's financial strength and claims-paying ability. State insurance departments regulate insurers.
It depends on how much of your essential spending Social Security and any pension already cover, and how comfortable you are relying on savings for the rest. That is a personal decision.
It means the insurance company is contractually obligated to keep making the payments described in the contract for as long as the contract terms say. Annuity guarantees are subject to the claims-paying ability of the issuing insurance company, not the government. Read the contract to see exactly what is and is not guaranteed.
There is no single right share. Some households like to cover essential bills such as housing, food and insurance with income that arrives regardless of markets, and use savings for flexible spending. Your own budget, health and comfort with risk shape the answer.
Joint life income keeps paying as long as either spouse is alive. Because it may pay longer, the monthly amount is usually lower than income for one life. In an annuity, those payments are subject to the claims-paying ability of the issuing insurance company.
Yes. Many retirees layer these sources so that most essential bills are covered by income that arrives every month. Each source has different rules for inflation, taxes and survivors, so it helps to list them side by side.
No. An annuity is an insurance contract, not a risk-free investment. Its guarantees are subject to the claims-paying ability of the issuing insurance company, and trade-offs can include surrender charges, fees and less access to your money. Understanding those trade-offs matters as much as the guarantee.
Annuities are not federally insured. Each state has a guaranty association that may provide some protection up to limits set by state law, and those limits and rules vary. This protection is not a reason to buy a product; checking the insurer's financial strength is a separate step.
This page is educational and general in nature. RetirementLeverage™ and Retirement Planning Store, Inc. do not provide individualized investment, securities, tax, or legal advice; please consult a qualified tax professional or attorney about your own situation. Insurance products and services may not be available in every state, and any guarantees are subject to the financial strength and claims-paying ability of the issuing insurance company.