What is the primary benefit of a straight life annuity?

A straight life annuity is designed to provide a stream of income for the lifetime of the annuitant, which inherently allows it to offer the highest monthly payment when compared to other types of annuities. This is primarily because the payments are made only for the lifetime of the individual, without the inclusion of additional features such as beneficiary payouts or period guarantees, which can dilute the monthly payment amount.

The structure of a straight life annuity means that once the annuitant passes away, the payments cease, thus minimizing the insurance company’s risk and allowing them to offer larger monthly payments. In contrast, other options that provide payments to multiple individuals, guarantee returns, or allow for tax deferral may dilute monthly benefits since these features typically include additional costs or risks that lower the payout. Therefore, the straightforward nature of a straight life annuity is why it can provide those highest monthly payments, making it an attractive option for individuals seeking dependable income during retirement.