If you’re considering an annuity, one of the first questions that comes up is simple…\
“What happens to my money when I die?”
Many retirees worry that the insurance company keeps the remaining balance. Others aren’t sure what their spouse or kids will actually receive. And with so many contract options—SPIAs, DIAs, MYGAs, income riders—it can feel overwhelming.
This article breaks everything down clearly, so you know exactly how your money passes on… and how to avoid the contracts that don’t return anything to your heirs.
Need help choosing the best annuity for your unique situation? Have questions about getting an annuity? If so, it’s best to speak with an annuity specialist. Watch this short video to see how I can help you do this (at no cost to you!)
Tip: See how much an annuity could pay you using our annuity calculator.
The Big Question: Does the Insurance Company Keep Your Money?
Most people fear the worst: “If I pass away early, does the insurance company keep everything?”
The answer is no—as long as you choose the right contract.
There are some annuities (like basic SPIAs or DIAs with no cash refund) where the insurance company keeps the entire balance if you die early. These offer slightly higher payouts, but the trade-off is big.
💡 Pro Tip: Avoid SPIAs/DIAs with “no refund” options unless you specifically want the highest payout and don’t care about leaving money behind.
👉 Want help choosing the safest refund options? Schedule a call.
Income Riders: The Most Legacy-Friendly Option
Income rider annuities typically offer:
- Higher guaranteed lifetime income than SPIAs or DIAs
- Contractual growth on the benefit base (often 7–8% a year)
- A guaranteed return of whatever is left in the account if you die
With an income rider, your heirs receive:
- Whatever the account value is at death
- No surrender charges
- Options for lump sum or multi-year payouts
For example, Allianz even gives beneficiaries more if they choose a 5-year payout instead of a lump sum.
This makes income riders one of the most flexible, family-friendly annuity options on the market.
What Happens to Your Money While You’re Taking Income
Here’s where many people get confused.
Here’s an example scenario illustrated in the video above:
- $600,000 premium
- Income starting at age 73
- Guaranteed lifetime income: $114,000 per year
- Benefit base growing at 8% annually
- Account value projected to reach ~$885,000 before income begins
So what happens if you die before or after income starts?
If You Die Before Taking Income
Your beneficiaries get the full account balance. No fees. No surrender charges.
Just the full amount.
If You Die After Income Starts
You may have already taken hundreds of thousands in income… but whatever account value remains still goes to your heirs.
Over time, the account will eventually hit $0, because your guaranteed income usually always outpaces the growth.
When that happens:
- Your income continues for life
- But the death benefit ends once the account value is depleted
That’s normal for lifetime income products—you are essentially outliving your balance while still getting paid.
What About Joint Payouts for Married Couples?
If you’re married, this part matters most.
With a joint payout:
- The income is guaranteed for both lives
- Even if one spouse dies, the other keeps receiving income
- The annual income is usually lower for joint (because it covers two lifetimes)
- Whatever is left in the account passes to beneficiaries once both spouses pass away
Another example:
- Single payout: $114,000/year
- Joint payout: $107,000/year
Yes, it’s $7,000 less—but it guarantees lifetime income for both spouses.
💡 Pro Tip: For couples, a joint income rider is often the best way to protect both spouses and leave money behind.
What If You Want a MYGA Instead of an Income Rider?
MYGAs (multi-year guaranteed annuities) work like CDs but often pay higher interest.
When you die:
- Your beneficiaries get the full account value
- No surrender charges
- Typically paid out quickly
MYGAs are excellent for simple legacy planning if you don’t need lifetime income.
👉 Want help deciding between a MYGA vs income rider? Book a call to learn more!
When Does the Death Benefit Disappear?
Only after the account balance hits zero—which typically happens:
- Many years into retirement
- After you’ve already received far more than you deposited
- When your lifetime income has outpaced your growth
This is not the insurance company taking your money—this is the annuity doing exactly what it’s designed to do: pay you for life, even after your money runs out.
Conclusion
Modern annuities are designed to protect you and your family.
✔ Your account value passes to your beneficiaries
✔ No surrender charges at death
✔ Income continues for your spouse with joint payouts
✔ You keep getting lifetime income even after your account reaches $0
✔ Only certain SPIAs/DIAs with “no refund” options fail to return money (and John rarely recommends these)
At the end of the day, annuities aren’t here to “take your money.”
They’re designed to protect it, grow it, and pass it forward.
Need help with finding the best annuity for your retirement?
Click here to schedule a call with me.
On the call, I can help you:
- Determine what type of annuity is best for you
- Find the highest paying annuities for your unique situation
- Answer any other questions you may have