# Annuitant: Understanding Definitions, Types, and Tax Implications

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## Who Is an Annuitant?

An annuitant is the person whose life determines the payments in an annuity contract. Annuities can be immediate, providing payments right away, or deferred, starting at a future date. The size of payments depends on factors like the annuitant’s [life expectancy](https://www.investopedia.com/terms/l/lifeexpectancy.asp) and the amount invested. Taxes on annuity payments vary based on the contract, with some income being tax-deferred until withdrawn, making it important to understand the specific terms before investing.

### Key Takeaways

*   An annuitant is eligible to receive annuity payments, often tied to pensions or retirement plans.  
    
*   Annuities offer guaranteed income, based on the annuitant's life expectancy.  
    
*   Annuities come in various types, including deferred and immediate, which can impact the payment timeline.  
    
*   Annuitants may name beneficiaries, allowing payments to continue after their death.  
    
*   An annuitant and a beneficiary are distinct roles within annuity contracts.

## Annuities Explained: What It Means to Be an Annuitant

An [annuity](https://www.investopedia.com/terms/a/annuity.asp) 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](https://www.investopedia.com/terms/i/investor.asp) who has paid money to an insurance company in return for a regular income supplement.

The annuity owner can name one or more annuitants, like a spouse or elderly parent, based on the contract. 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](https://www.investopedia.com/terms/t/trust.asp).

Payment amounts depend on the annuitant's age and life expectancy, as well as that 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.

> **Fast Fact**
>
> Most annuities are taxed as ordinary income.

In a "life-plus" annuity, payments continue for the annuitant's life and then transfer to a surviving spouse for a set time.

## Exploring Different Types of Annuities

Annuities have many variations but fall into two main 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](https://www.investopedia.com/terms/p/periodcertain.asp) annuity.

## How Are Annuities Taxed?

Annuities are generally taxed as ordinary income. The portion of [the annuity payments](https://www.investopedia.com/articles/retirement/05/071105.asp) that represents the contract holder's [basis](https://www.investopedia.com/terms/b/basis.asp) is not taxed, only the [gain](https://www.investopedia.com/terms/g/gain.asp) portion. In the case of an employer pension, the entire payment is generally taxed as ordinary income.

## Is an Annuitant the Same as a Beneficiary?

No, an annuitant is different from a beneficiary. In an [annuity contract](https://www.investopedia.com/terms/a/annuitycontract.asp), though an annuitant might be the same person as the annuity owner, the annuitant cannot be the same person as the beneficiary. The beneficiary is the person who receives the death benefit when the annuitant dies.

## What Happens to an Annuity When the Annuitant Dies?

This depends on the annuity contract. If the contract stipulates a [single life payout](https://www.investopedia.com/terms/s/single-life-payout.asp), then there are no death benefits. The payouts stop at the end of the annuitant's life. If it's a [joint-life payout](https://www.investopedia.com/terms/j/joint-life-payout.asp), then there are death benefits: the beneficiary is eligible to collect payments until the end of their life. The beneficiary is typically a surviving spouse, but not always.

## The Bottom Line

An annuitant is a person entitled to receive payments from a pension or annuity, usually as a supplement to retirement income. While the annuitant is often the annuity owner, they can also be a beneficiary, though this is separate from the death benefit recipient. Annuities come in two main forms: deferred, which grow as retirement savings, and immediate, which begin paying immediately after a lump-sum investment. Payments are based on the annuitant’s age and life expectancy, and most distributions are taxed as ordinary income except for the original investment.