Can Your Annuity Income Really Last a Lifetime?

October 8,2025

Introduction

Retirement planning often brings up the pressing question: “Will my income last as long as I do?” For millions of Americans, annuities provide the promise of guaranteed monthly payments, offering peace of mind in volatile times. But not all annuities are created equal, and understanding whether an annuity can truly deliver lifetime income—or run out of money—is crucial before making it a centerpiece of your financial strategy.

 

Understanding How Annuities Keep Paying

What Are Annuities and How Do They Work?

An annuity is a contract where you pay a lump sum in exchange for regular income, usually from an insurance company. They’re prized for their predictability and are often pitched as a way to avoid outliving your retirement money—even in turbulent markets or while living longer than expected.

 

Types of Annuities

Lifetime Immediate Annuities: Designed to never run out of money if the insurer remains solvent. Payments continue for life, even if you live to 100.

 

Fixed-Term Annuities: Pay for a set number of years (often 10 or 20); once the term ends, payments stop, and the income can run out.

 

Variable & Indexed Annuities: Payments can depend on investment performance. If investments do poorly and you lack income guarantees, your cash value can be depleted.

 

Can an Annuity Run Out of Money?

Core Factors That Determine Longevity

Type of Contract: Only lifetime income annuities guarantee income until death. Others, such as fixed-term and some variable annuities, may exhaust funds based on payout schedules or poor investment returns.

 

Insurance Company Solvency: Lifetime income is only guaranteed as long as the issuing insurer is financially healthy. If the company fails, state protections may exist but can have limits.

 

Withdrawal Behavior: Overdrawing an annuity—whether taking excess or early withdrawals—can deplete funds faster than anticipated.

 

Add-On Riders: Optional riders (like income riders for variable annuities) often come with fees but can guarantee payments even if the account value falls to zero.

 

Common Scenarios Where Payments End

Annuity Type  Outliving Payments Possible? Why

Lifetime Immediate    Rare — insurer pays for life    As long as insurer stays solvent

Fixed-Term      Yes       Payments stop at end of term

Variable/Indexed No Rider     Yes       Investment losses reduce value

With Income Rider     Unlikely           Guarantees lifetime payments

Strategies to Prevent Running Out of Annuity Income

Choose Lifetime Income

Lifetime annuities offer predictable monthly income for life, regardless of market fluctuations, though often with lower monthly payouts than term annuities.

 

Add Income Riders

Variable and indexed annuities can be paired with income riders (for an extra fee), which provide lifetime payment guarantees even if the account balance empties.

 

Diversify Retirement Income

Relying solely on an annuity can be risky. Combine annuity income with Social Security, pensions, investments, and emergency savings for broader financial security.

 

Investigate Insurance Companies

Select annuity providers with strong financial ratings from agencies like A.M. Best or Moody’s. Check your state’s guaranty association for backup coverage limits if the insurer goes under.

 

Monitor Withdrawal Habits

Stick to recommended withdrawal limits. Drawing more than allowed or cashing out early may dramatically shorten the annuity’s payout period.

 

Conclusion: Smart Planning for Lifetime Income

Not all annuities guarantee lifetime income. While lifetime immediate annuities aim to provide payments for life, others may run out—either by design or if withdrawals exceed planned limits. The strength of your insurance provider also matters. Savvy retirees compare options, ask about riders, and diversify income sources to avoid financial gaps in retirement.

 

Ready to secure recurring retirement income that lasts? Consult a trusted advisor, compare annuity products, and prioritize lifetime payout features in your retirement plan.

 

FAQ Section

Q1: Which annuities guarantee lifetime payments?

Lifetime immediate annuities, and variable/indexed annuities with income riders, offer payments for life so long as the insurer remains solvent.

 

Q2: Can annuities run out because of investment losses?

Yes, variable and indexed annuities without income guarantees can deplete if investments perform poorly.

 

Q3: What happens if the insurance company fails?

Payments may be at risk, but state guaranty associations sometimes offer limited coverage for annuity holders.

 

Q4: Is it safer to combine annuities with other income sources?

Absolutely. Combining Social Security, pensions, and savings with annuities helps safeguard retirement income.

 

Q5: Can withdrawing extra money reduce annuity lifespan?

Yes. Taking out more than the recommended amount can shorten or stop annuity payments before you expect.