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In 2009, Ted purchased an annuity for $60,000. The annuity is to pay him $1,500 per month for the rest of his life. His life expectancy is 120 months. A). Ted is not required to recognize any income until he has collected 40 payments (40 $1,500 = $60,000).
Read: 401K Contribution Limits. Typically, a pension will offer several different annuity payout options, and possibly a single lump-sum option. An âannuity payoutâ option is essentially a monthly benefit that is paid to you for life (and possibly the life of a spouse). Some pension plans may offer a âperiod certainâ payout option as well. Below is a summary of some of the typical annuity options: In addition to the basic options above, some pension plans will offer some unique strategies such as income-leveling or âpop-upâ provisions that are great in certain situations.