The Learn Hub · Education, not a pitch
Income annuities — trading a lump sum for a paycheck
What an income annuity is, who it is for, who it is emphatically not for, and the risks that ride along — described generically, no product named.
A note on who Max is. Max is a cartoon owl. He is not a financial advisor, insurance agent, or tax professional, and nothing here is personalized advice. When a question turns personal, he does not answer it — he teaches the general version and points you to a licensed conversation, which is automated and says so before it says anything else.
What it is
An income annuity is a contract with an insurer: you hand over a lump sum, and in return the insurer pays you a set income — starting now (an immediate annuity) or later (a deferred one). It is longevity insurance. Its one real job is to guarantee a paycheck you cannot outlive, so essential spending is covered no matter how long you live or what markets do. A specialized version can defer some required distributions on the contract value within limits.
The figure that touches it
- Required minimum distribution ages
- 73 or 75 for 2026, depending on your birth cohort
Who it fits — and who it does not
- Fits
- Retirees who want a guaranteed floor under essential spending, worry about outliving their money, and value certainty over upside.
- Does not fit
- People who need liquidity, are in poor health, or have a strong desire to leave the principal to heirs. Money committed to income is money you generally cannot get back.
Education only
This describes the instrument. It names no carrier, quotes no rate, and recommends nothing. Whether an annuity belongs in a plan, and which kind, is a licensed conversation.
The trap that lurks here.
Three, and they are permanent. A fixed income that looked generous can be quietly eaten by inflation over a long retirement. The guarantee is only as good as the insurer's ability to pay, so credit quality matters. And the decision is largely irreversible — the pricing is locked and the principal is committed. This is also exactly the product the Free-Lunch Vulture pushes hardest, because the commission is large; understanding it yourself is the best defense.
Figures on this page are for tax year 2026 and were last verified 2026-07-25. Tax and benefit numbers change every year — check the current-year figure before acting on any of them. The 2026 Medicare IRMAA income tiers were not yet confirmed when this was written; where they matter, they are named but not stated as fact.
Related
Desk’s open.
— Max