Table of Contents

Do Annuity Companies Keep the Money When I Die?

Stan Haithcock
June 17, 2024
Do Annuity Companies Keep the Money When I Die?

Hello America! My name is Stan The Annuity Man, America's annuity agent, licensed in all 50 states. Today's question is, do annuity companies keep the money when you die? I always get this question and the statement, "I'd never buy an annuity because they keep the money. I don't like that." Well, I blame the annuity industry for that phrase even being uttered because that's nonsense. That's only one way to structure an annuity. Under that specific premise, life only, the annuity company does keep the money, but that is about 1% of my clients that choose to do that. And when they decide to do that, I drill them, grill them, and say, "Are you sure? Do you understand when your Learjet hits the mountain, your money goes poof?" And they either hate their wife, hate their kids, a combo of both, or they don't have either and they're smart and rich, right? Nod your head. But the answer is annuity companies don't always keep the money. If they keep the money, it's up to you. And we're going to cover that.

‌State Regulations

‌There are many types of annuities out there. There's not just one type. I hear it all the time, "I hate all annuities." Really? You just hate annuities? Really? So, you hate all restaurants? I mean, some restaurants are bad, some restaurants are good. Some annuity types are bad, and some annuity types are good, but there's not just one annuity, and annuities are primarily fixed products. There's only one that's a Variable Annuity. Still, regardless of whether it's a Variable Annuity or Fixed Annuity, Immediate Annuity, QLAC, Deferred Income Annuity, Index Annuity, or Multi-Year Guarantee Annuity, it doesn't matter. They're issued by life insurance companies. They're contracts. The Fixed Annuities are regulated at the state level and issued and approved at the state level.

‌When you're looking for annuities, you need to understand that your state of residence will determine the products you get to choose from and the amount of offerings out there. For instance, Florida and, say, Texas has a ton of offerings, whereas some states like Oregon, New Jersey, and New York have minimal offerings. That's up to the state, that's up to the financial department, the division of financial services, whatever they're called in their state, they make that call. Annuity companies go in there, pitch the products, offer the products, and provide all the details and the paperwork. The state approves of them, or they do not. But annuity companies don't keep the money unless you tell them to. So, that only happens with lifetime income products. If you're buying a Deferred Annuity like a Multi-Year Guarantee Annuity, a Fixed Index Annuity, or a Variable Annuity, they're not going to keep the money. Whatever's left in the account will go to the listed beneficiaries when you die. A Multi-Year Guarantee Annuity and a Fixed Annuity are principal protected. You'll get the money plus the interest minus what you took out. That's what your beneficiaries are going to get. The evil annuity company doesn't keep a penny.

‌Variable Annuities

‌With Variable Annuities, same thing. You have Variable Annuity, you have mutual funds, they call them separate accounts for some reason, they, the annuity companies, but they're mutual funds, and you get them when you pass away. Does the annuity company keep any? No, of course not. Now, when it comes down to them keeping money, it is with income products that are annuitized, and those products are primarily three: Single Premium Immediate Annuities, Deferred Income Annuities, and Qualified Longevity Annuity Contracts.

‌Life Only

‌The only way that the annuity company keeps the money is if you decide that you want a life only contract. What is a life only contract? Regardless of how long you live, it will pay you for the rest of your life. But when your Learjet hits the mountain, poof, boom, you're dead. Then, the evil annuity company keeps the money.

‌Joint Life

‌If it's joint life, let's say you set it joint life with your spouse or partner; you're going to get paid for as long as you live. And let's say you die. Okay? Who cares? Your spouse is, of course they care, your spouse will get the income stream uninterrupted and unchanged for the rest of their lives. But when they die, money goes poof. So, life only and joint life only are pretty much the only way that the annuity company will keep the money.

‌Period Certain

‌Now, you could put a joint life with a 10-year period certain or a joint life with a five-year period certain, joint life with a 20-year period certain. What does that mean? It's still going to pay you for life. But if you die early in the contract, then someone in your family's going to get paid that period certain amount. So, just for example, if you said we're going to do a joint life with a 10-year period certain, and you died in year two, both of you, then somebody in your family is going to get eight more years of payments. Your life expectancy could be longer than 10 years, which means the annuity company will keep everything after that payment is done after year 11.

‌If you live forever, they're going to pay forever. It really comes down to how you structure it. And suppose you do not want the evil annuity company to keep a penny. In that case, you have to tell us, and we'll use our annuity calculators to make sure that the quote reflects your desire to get the guaranteed payment period and make sure that the annuity company does not keep any penny under any circumstance.

‌The bottom line, let's get back to the point of this whole blog, which was, do annuity companies keep the money? You know what, that's up to you. If you want them to, that's fine. That means you'll get a higher payment guarantee if you die early in the contract. But understand it's your decision, and you get to customize the contract exactly how you want it to be. So, with that, I will see you on the next Stan The Annuity Man blog.

Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.

Learn More