Annuitization
The process of converting an annuity's value into a stream of income payments, backed by the issuing insurance company and not FDIC insured.
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.
Related Terms
Annuity
A contract with an insurance company that can turn a lump sum into a stream of income, often for life.
Income Rider
An optional annuity feature that provides lifetime withdrawals without giving up access to the contract value.
Immediate Annuity
An annuity purchased with a lump sum that begins paying income almost right away.
Deferred Annuity
An annuity that grows during an accumulation phase before income payments begin later.
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Annuities are insurance contracts. Guarantees, including guaranteed lifetime income benefits where available, are subject to the claims-paying ability of the issuing insurance company. Product features, fees, withdrawal restrictions, and surrender charges vary by contract.