The annuity is an investment vehicle often used for retirement. By its very nature, an annuity is a sum of money given to an insurance company, so that a lifetime income can be provided sometime in the future.

When people retire they have an important decision to make. What should I do with my retirement money? An individual may roll their retirement into an annuity. Many people stop right at this point, but others prefer not to outlive their money. So they decide to annuitize it.

If you annuitize your annuity, the insurance company will turn your principle into a monthly, quarterly, semi-annual, or annual income. Yes, once you annuitize the policy, you generally have to live with your decision. However there are some instances where it may be advantageous to annuitize. A widow or widower with no kids may care more about living comfortably during their retirement years than skimming off his or her retirement and possibly outliving that money. Another reason to annuitize your annuity would be as a part of a pension-max program. In this scenario, you would buy enough life insurance on yourself to cover the lost of the income from your death. By doing this, you can elect the highest annuity payout without the fear of leaving your spouse broke.

There are several annuitization options found under an annuity. You may elect to have one life insured or a joint life annuity. Most of the time, you can choose to have annuitized payments guaranteed for a certain period of time, regardless of when you die. It is not uncommon to see guaranteed periods ranging from 2-10 years based on someone's age. However, if you choose a single life annuity with no period certain, payments will cease upon your death. Likewise, on the joint and last survival life annuity, upon the death of the second spouse, your annuity payments are kept by the insurance company. So, if longevity runs in your family, this may be your product.

Annuitizing an annuity can be a useful retirement option when you do not want to outlive your money. It can also be used in conjunction with a strategy such as a pension max.

*Disclaimer: Always consult a tax advisor or financial advisor when making investment decisions.

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