Annuitization for Guaranteed Income
Annuitization for guaranteed income is an attractive selling point for an annuity. As with most annuities, there are pros and cons:
Your income is likely guaranteed at a predetermined rate.
Annuitization is the point at which you exchange the value of your contract with the insurer (meaning you give the savings within your annuity to the insurer) in exchange for a guaranteed stream of payments which can be structured to last either a predetermined number of years or for your lifetime (and sometimes your spouse’s lifetime too.)
Annuitization options are complicated and are generally irrevocable.
If a goal is to leave funds to heirs, heirs could be better served without annuitization (depending on the contract and selected annuitization option.)
Guaranteed payments may not factor in inflation.
If you plan on using your guaranteed payments to cover your cost of living, rising inflation could reduce the purchasing power of your annuity payments.