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What Is a Guaranteed Lifetime Income Annuity?

Stan Haithcock
March 25, 2024
What Is a Guaranteed Lifetime Income Annuity?

Hi there. I'm Stan The Annuity Man, America's annuity agent, licensed in all 50 states. What is a guaranteed lifetime income annuity? We will get into that right now.

‌A guaranteed lifetime income annuity comes in many forms. It can be an Immediate Annuity, a Qualified Longevity Annuity Contract, a Deferred Income Annuity, or Income Riders. You can even peel off interest from Multi-Year Guarantee Annuities. We're going to cover all of that today.

‌Brief History

‌Everybody, get your pen, paper, tablet, and computer out; we're going to do a session called the History of Annuities, and your professor for today is Stan, The Annuity Man, America's annuity agent, licensed in all 50 states. That would be me. Let's talk about the history of annuities. People say, "Well, I hate all annuities; I hate them all." That's just crap. Annuities have been around since the Roman times. Hello Caesar! And how were they started? The dutiful Roman soldiers were laying it on the line for the empire; they were rewarded by the empire with annual, A-N-N-U-A, which is the root word for an annuity. Those were lifetime payments for the dutiful Roman soldiers and their families. That's where annuities started. That's the history of annuities.

‌By the way, those annuas, I'm not really good at Latin, if you've caught that, there's a little southern in my Latin, Southern Latin, Southern Italian, no, that's not right. Anyway, the point is those annuas that were paid to those dutiful Roman soldiers are pretty much the same thing as a Single Premium Immediate Annuity sold today.


‌One of the biggest misconceptions out there in the annuity world, and I blame the annuity industry a little bit because they haven't educated the public enough; people think that when you die with a lifetime income guaranteed annuity, the evil annuity company keeps the money. That is only one of about 35 to 40 different ways to structure it. But I get a call every week from Chester, and he says, "I'd never buy an annuity because you die, the insurance company keeps the money." That is called a life-only or joint life-only annuity, meaning that when you die, when your Learjet hits the mountain, the money goes poof. But you do not have to structure it that way. You can structure it so that the annuity company's still on the hook to pay for the rest of your life even if you live to 150. Still, when you die, you can structure it contractually so that 100% of any unused money goes to the listed beneficiaries, and the evil annuity company doesn't keep a penny. Are we clear on that? Do not think that every single annuity for lifetime income, the evil annuity company keeps the money. By the way, that's your decision. Your decision on how to structure it, period.

‌Client Example

‌All right, so Chester called me the other day, and he goes, "I'm a-getting Social Security, Stan, we have all this money sitting in the bank, and everybody just says, 'Just take money out of the bank.' I want to make sure it's guaranteed."

‌Chester, you're on the right track, and you might be Chester too, probably not named Chester, but you might want to transfer the risk, too. What we did with Chester and his wife Martha, is we set up a lifetime income stream to combine with his Social Security payments, which is also an annuity, and we transferred that risk so he has two income streams coming in that they both can never outlive.

‌Life Expectancy

‌When it comes to guaranteed lifetime income, just remember this. Life expectancy drives the pricing train. It's all about life expectancy. The older you are, the higher the payment. The younger you are, the lower the payment. Sound familiar? Social Security? The older you are, the higher the payment? If you're 70, the payment will be higher than if you're 65. The same exact thing with annuities. Why? Because Social Security is an annuity. Annuities, it's all about life expectancy.

‌People always say, "Well, if I wait two years, will it be higher payment?" Yes, you'll be older, and what does that mean? That means your life expectancy will be less, which means the payments will be shorter, which means the payments will be higher. It's that simple. Remember, lifetime income guaranteed annuities are all about life expectancy.

‌Interest Rates

‌Okay, I just talked about life expectancy, so let's talk about interest rates. Guaranteed lifetime income is a combination of return or principal plus interest. How do interest rates play into this? First of all, when you're getting a lifetime income stream, life expectancy does play the primary role as I just mentioned, but interest rates play a secondary role. But most people are under the assumption that they can time interest rates or if they need to wait until interest rates move. No, you can't time it. If you're going to try to time interest rates on the purchase, then you have to factor in all of those payments you missed while you were waiting and trying to be a master of the annuity universe, which you're not. I'm not. You cannot time it. If interest rates are higher, and look at the 10-Year Treasury, that's the bogey for the annuity industry; if they're higher, obviously, the payment will be a little bit higher. But life expectancy drives the train, just like I said previously, so don't get fixated on interest rates when you're looking for lifetime income.

‌There's No ROI Till You Die

‌People always ask me questions about Immediate Annuities, Deferred Income Annuities, QLACs, Income Riders, and these lifetime income guaranteed annuities. What's the ROI on that Stan? What's the return on investment? I'm an investor; I'm a master of the universe. I'm used to understanding return on investment. I'm going to give you a really cute rhyme to remember. There's no ROI till you die. Up until then, it's a transfer of risk. If you can tell me when you're going to die, I can give you the ROI, but you're transferring the risk to the annuity company to pay you for the rest of your life. Only annuities can provide that lifetime income guarantee, period. Just remember, there's no ROI until you die. You're transferring the risk. Oh, by the way, if you think that's a crazy statement, have you ever asked the question, what's the ROI on your Social Security annuity? No. It's a payment for the rest of your life. It's the same thing with lifetime income guaranteed annuities.

‌What is a guaranteed lifetime income annuity? It is what it is. It pays you for the rest of your life. It's your own personal pension. It combines with Social Security so you can have money coming in, hitting your bank account for the rest of your life. I want you to visit The Annuity Man and run quotes. I'm not even going to be there. You can call me if you wish. You can schedule a call, you can run quotes, you can get my books. But the bottom line is we have it set up at The Annuity Man so you can run your own lifetime income quotes and see what the numbers are. Then, when you see them, you go, "Oh, that looks great. I got to call Stan." Then you schedule the call, and we get on the phone, and we go through all the carriers and all the numbers, and I explain it, and that's how it goes. I'll see you on the following 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.

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