"Income" from an annuity isn't one thing — it's two genuinely different strategies, with different tradeoffs. Here's both, broken down in plain English.
When people say they want "income" from an annuity, they usually mean one of two very different things. Getting these confused is where most of the confusion about annuities comes from — so let's separate them clearly.
| Feature | Term Income (MYGA) | Lifetime Income |
|---|---|---|
| How long payments last | A set number of years you choose | For life — no matter how long you live |
| What happens to your deposit | Returned in full at the end of the term | Spent down over time; typically not returned as a lump sum |
| What's locked in today | A guaranteed interest rate | A guaranteed payout rate |
| Best protects against | Uncertainty about return, for a known stretch of time | Outliving your savings |
| Access to remaining funds | Yes — same as any MYGA (surrender charges may apply early) | Typically none once income starts, unless a specific rider is added |
This approach uses a MYGA the way you might use it for growth — except instead of letting the interest compound, you take it out as income, typically paid monthly. At the end of the term, your full original deposit comes back to you.
Here's what that actually looks like with real numbers: deposit $100,000 into a 5-year MYGA at a 6% guaranteed rate, and take the interest out annually instead of letting it grow. You'd receive $6,000 a year — or $500 a month — every year for 5 years. At the end of year 5, your original $100,000 is still there, untouched, and comes back to you in full.
Our MYGA calculator has a dedicated "Calculate Income" mode built for exactly this — enter your deposit, rate, and term to see your own annual and monthly income figures.
This approach works completely differently. Instead of a set term, you lock in a payout rate today, and the insurance company guarantees you income for the rest of your life — even if you live 10 years past what anyone expected. The tradeoff: this is a spend-down structure. You're generally not getting a lump sum of your original deposit back; the value is paid out to you as income over time instead.
The insurance mechanism behind this is what actually makes it possible: because the payout is guaranteed for life regardless of how long that turns out to be, payments can genuinely continue even after your own account value would otherwise be fully spent down — the insurer is pooling that longevity risk across everyone in the contract. That's the entire point of this option, and it's something no fixed term product can offer.
Some lifetime income products offer riders (like a cash refund or period-certain guarantee) that provide some payout to your beneficiaries if you pass away early. These add cost and reduce the payout rate somewhat — whether that tradeoff makes sense depends entirely on your own situation and priorities.
For a full breakdown of how lifetime income products actually work — including SPIAs and FIAs with an income rider — see our complete guide to income annuities.
These two strategies solve different problems, and plenty of retirement plans genuinely use both — term income to bridge a specific number of years, and lifetime income to guarantee a base level of income that can never run out. The right mix depends entirely on your own timeline, other income sources, and how much you value flexibility versus certainty.
This is exactly the kind of thing worth talking through. Contact Devin for a free, no-pressure conversation about which approach — or combination — makes sense for you.
No pressure, no obligation. Explore the rate tool, take the 2-minute quiz, or ask Devin anything — whatever helps you understand your options.