What Is the Best Type of Annuity for Retirement Income?

What is the best type of annuity for retirement income?

That’s a loaded question.

There is not one best annuity for everyone.

There are four different types that can provide lifetime income, and the right one depends on when you want the income to start.

Key Takeaways

• There are four main annuity types for retirement income
• Single Premium Immediate Annuities are used when income starts within one year
• Deferred Income Annuities, QLACs, and Income Riders are used for future income
• The best annuity is the one with the highest contractual guarantee for your situation
• Lifetime income should generally use A+ rated carriers or better
• The decision starts with two questions, what do you want the money to do, and when do you want it to start

The Four Types of Retirement Income Annuities

If your goal is retirement income, there are four main types to look at:

• Single Premium Immediate Annuities
• Deferred Income Annuities
• Qualified Longevity Annuity Contracts
• Income Riders

All four are designed to create income for life.

If You Need Income Within One Year

If you need income to start:

• immediately
• in six months
• within one year

That is typically a Single Premium Immediate Annuity.

It is a transfer-of-risk pension product with:

• no market attachments
• no annual fees
• no moving parts

If You Need Income Later

If income starts more than one year from now, then you are usually looking at:

• Deferred Income Annuities
• Income Riders
• Qualified Longevity Annuity Contracts, if IRA money is being used

That timeline determines the product type.

How QLACs Fit

A Qualified Longevity Annuity Contract is used inside a traditional IRA.

Yes, annuities can be used inside IRAs.

QLACs were created to generate lifetime income from IRA assets.

Income Riders

Income Riders are usually attached to Fixed Index Annuities.

The Fixed Index Annuity is the delivery system.

The rider is the lifetime income guarantee.

That is the part that matters.

The Two Questions That Decide Everything

Before choosing the product, ask:

What do you want the money to contractually do?

When do you want those contractual guarantees to start?

For retirement income, the first answer is usually:

Lifetime income.

The second answer determines which annuity type fits.

Protecting Beneficiaries

A lot of people think:

“If I die, the annuity company keeps the money.”

That does not have to be true.

Lifetime income can be structured so that **100% of any unused money goes to **beneficiaries.

That backstop matters.

Carrier Quality Matters

For lifetime income, the carrier matters.

The rule is:

A+ rated or better.

No exceptions.

You are marrying that company for life, so the company must be strong enough to back up the claim.

Do Not Time the Fed

Lifetime income pricing is not primarily driven by the Fed.

It is primarily driven by:

life expectancy.

Interest rates play a minor role.

That means waiting on Fed meetings is usually the wrong way to think about retirement income annuities.

Where to Compare Retirement Income Options

Once you know when you want income to start, the next step is seeing the actual guarantees.

You can compare SPIAs, DIAs, QLACs, and Income Riders using our annuity calculators here: https://www.stantheannuityman.com/ annuity-calculator/

The Bottom Line

The best type of annuity for retirement income depends on your timeline.

• Income within one year, Single Premium Immediate Annuity
• Income later, Deferred Income Annuity, QLAC, or Income Rider

There is no one-size-fits-all answer.