Annuitant: Definition and Types

Who Is an Annuitant?

An annuitant is someone who is entitled to collect the regular payments of a pension or an annuity investment. The annuitant may be the contract holder or another person, such as a surviving spouse.

Annuities are generally seen as retirement income supplements. They may be tied to an employee pension plan or a life insurance product. The size of the payments is usually determined by the life expectancy of the annuitant as well as the amount invested.

Understanding Annuities and Annuitants

An annuity is a regular payment of a guaranteed income for life or for some specified number of years. An annuitant may be a retired civil servant who receives a pension plan, or an investor who has paid money to an insurance company in return for a regular income supplement.

Depending on the specifics of the contract, the owner of an annuity may name one or more annuitants, such as a spouse and an elderly parent, or may arrange a joint annuity. The annuitant can also arrange for the payments to be transferred to a surviving spouse if the need arises. In any case, the annuitant must be a person, not a company, organization, or trust.

The amount of the payments to an annuitant is based on the individual's age and life expectancy, and the age and life expectancy of any beneficiaries. For example, if the annuitant is 65 years old, but the annuity is transferrable to his 60-year-old wife if she survives him, the insurance company will calculate that it will make monthly payments for about 24 years, which is the life expectancy of a 60-year-old woman.

In yet another variation, an annuity can be for a term of "life-plus"—that is, the payments will continue for the annuitant's lifetime and then be transferred to a surviving spouse for a specified period of time.

Types of Annuities

There are many variations of an annuity, but they can be boiled down to two basic types:

1. A deferred annuity is often used as a retirement savings vehicle. The annuitant invests money regularly over time in return for a stream of annuity payments at some point in the future. Many company pension plans are structured this way.
2. An immediate annuity is just what it sounds like. The annuitant pays a lump sum of money in return for a series of payments that begin immediately and are paid for life or for a specific period of time. The latter option is called a life plus period certain annuity.

The Bottom Line

An annuitant is someone who receives a periodic or lump-sum payment for the rest of their life or for a certain period. The annuitant is often but not always the owner of the annuity, Their goal is typically to have a regular income stream sustain them in their retirement years.