A straight-life annuity pays monthly income for one person’s lifetime and stops when that person dies, with no survivor benefits.
A straight-life annuity is one of the most common payout options in pensions and retirement plans. It is designed to provide steady, predictable income for as long as one person lives. Because payments end at death, this option usually offers the highest monthly payment compared to other annuity choices.
Understanding a Straight-Life Annuity
A straight-life annuity (also called a life-only annuity) is an arrangement where retirement benefits are paid to a single individual for the rest of their life. Payments are usually made monthly, but some plans may offer different schedules.
Once the annuitant passes away, payments stop completely. No remaining balance is paid to a spouse, child, or other beneficiary.
This structure makes the straight-life annuity simple and efficient, but it also means there is no financial protection for survivors.
How a Straight-Life Annuity Works in Real Life
Imagine a retiree who has a pension from a former employer. At retirement, the plan offers several payout options. If the retiree chooses a straight-life annuity:
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They receive a fixed monthly payment for life
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Payments continue no matter how long they live
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Payments stop immediately upon death
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No benefits are paid to a spouse or heirs
For example, a retiree might receive $2,200 per month under a straight-life annuity. A joint-and-survivor option, by comparison, might pay only $1,900 per month because it continues payments to a surviving spouse.
Why Straight-Life Annuities Pay More
Straight-life annuities generally provide the highest monthly income because the insurance company or pension plan only has to cover one lifetime. There is no obligation to pay benefits after the individual’s death.
From a financial perspective, this reduces risk for the plan provider. That lower risk is passed on to the retiree in the form of higher monthly payments.
Who Should Consider a Straight-Life Annuity?
A straight-life annuity may be a good choice for people who:
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Are single or have no dependents
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Have other assets set aside for heirs
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Need the highest possible monthly income
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Have a shorter life expectancy and want to maximize payments
It can also work well when a spouse has their own pension or significant retirement savings.
Potential Drawbacks to Keep in Mind
While a straight-life annuity is simple, it is not right for everyone. Some key disadvantages include:
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No survivor income for a spouse or family member
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No refund of unused funds after death
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Irreversible choice in most pension plans
Once payments begin, the decision usually cannot be changed. This makes it important to fully understand the long-term impact.
Straight-Life Annuity vs. Other Annuity Options
Compared to other retirement income choices, a straight-life annuity is the most basic form:
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Joint-and-survivor annuities provide ongoing income to a spouse
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Period-certain annuities guarantee payments for a minimum number of years
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Cash-refund annuities return remaining value to beneficiaries
Each alternative trades lower monthly income for added protection.
Final Thoughts on Straight-Life Annuities
A straight-life annuity is a straightforward way to turn retirement savings or pension benefits into guaranteed lifetime income. It offers simplicity and higher monthly payments but provides no financial support after the annuitant’s death.
For retirees focused on maximizing income during their lifetime, this option can be appealing. However, anyone with dependents or a surviving spouse should carefully weigh the lack of survivor benefits before choosing a straight-life annuity.
