Straight Answer

What is an income annuity?

The classic conception of an annuity — converting assets into a stream of payments.

Short Answer

An income annuity is a contract primarily designed to convert a sum of money into a stream of income under specified contract terms. Payments can begin almost immediately (an immediate annuity) or at a future date (a deferred income annuity). In exchange for predictable income, you typically give up access to the lump sum you used to fund it.

Income annuities are the type most people picture when they hear the word "annuity": you hand over a premium, and the insurer pays you income for a defined period or for life.

Immediate vs. deferred

Immediate (SPIA): payments begin shortly after funding.
Deferred (DIA / QLAC): payments begin at a future date you select, often in exchange for higher eventual income.

Income annuities typically trade liquidity for income. Once annuitized, the lump sum is generally no longer accessible, and the election is often irrevocable. This is a meaningful tradeoff that suits some money and not others.

Potential Advantages

Predictable income that can last for life.
Can address longevity risk — the risk of outliving your money.
Simple, defined payment terms.

Tradeoffs and Limitations

Once annuitized, the principal is typically inaccessible.
Payments may not keep pace with inflation unless structured to.
Death-benefit treatment depends on the payout option selected.

Who Might Consider This

Those who want to convert a portion of savings into predictable lifetime income and can accept giving up access to that principal.

Who May Prefer Other Options

Those who need access to the principal, want growth potential, or are concerned about inflation may prefer other structures for that money.

Questions to Ask Before Deciding

What payout options are available (life, period certain, joint)?
What happens to payments upon death under each option?
Can payments increase with inflation?

Why do some financial advisors say annuities are bad?When might an annuity be the wrong choice?

Sources & References

Last updated: 2026-09-29This content is a draft pending qualified human review.

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Disclosures

The content on TheAnnuityTruth.com is educational and general in nature. It is not individualized investment, legal, or tax advice. Annuities are insurance products; product availability and features vary by carrier and jurisdiction, and guarantees are subject to the terms of the issuing insurance contract and the claims-paying ability of the issuing insurer. Annuity contracts are not FDIC insured, are not bank guaranteed, and are not a deposit or obligation of, or guaranteed by, any bank.