Gospel Guidebook: Getting and Keeping It Right 
Does the Story of the Rich Man and Lazarus Teach Eternal Conscious Torment?
(This article was taken from the Gospel Guidebook Q&A section.)
No, it doesn't. Assuming for a moment that this story gives a literal and accurate depiction of the afterlife, it still does not give us enough information to determine the duration of the torment in Hades (translated as "hell" in the KJV). The only thing we know is that Abraham says, "there is a great gulf fixed: so that they which would pass from hence to you cannot; neither can they pass to us, that would come from thence" (Luke 16:26). It is impossible to say whether or not this "great gulf" will be removed some day or if the people being tormented will eventually be released. Jesus said that He has the "keys of hell and of death" (Revelation 1:18). So, while it may be impossible for the inhabitants of Hades to unlock the door themselves, Jesus certainly can do it. Also, we know that Hades itself will eventually give up its dead and be cast into the lake of fire (Revelation 20:14). The lake of fire is the second death, and we know that the last enemy to be destroyed by Jesus is death (1 Corinthians 15:26). Therefore, we have reason to believe that the state described in Luke 16:26 will not be permanent. Furthermore, the Greek word aionios commonly translated as "eternal" is not mentioned in the story. Therefore, this story cannot be used to teach eternal (i.e., never-ending) conscious torment.
It is also interesting that Abraham mentions people on his side of the great gulf actually wanting to go over to the other said of the great gulf. If the other side of the great gulf were simply a hateful and dungeon-like furnace of torment, it is hard to imagine that anyone would want to visit there. At the very least, Abraham's statement leave much to the imagination.
The main issue in this story is not be whether it teaches eternal (i.e., never-ending) conscious torment. It clearly does not. As mentioned already, the Greek word aionios is not even used once in the story. Rather, what can be debated is whether or not the story sets forth a conscious intermediate state between death and the resurrection. In the previous two paragraphs, I assumed that the story gives a literal and accurate depiction of the afterlife. But this assumption is highly debated. It is my personal opinion that it doesn't, and I will now make a few remarks on why I believe we shouldn't rely on the story of the rich man and Lazarus to teach us accurately about the afterlife.
First, the story starts off like a parable by saying "There was a certain rich man" (Luke 16:19), which are the exact same words used in Luke 16:1 and similar to the words found in Luke 14:16. However, at the same time, it identifies specific persons, namely, Abraham and Lazarus, which is something parables usually don't do. Furthermore, it uses figures of speech such as "Abraham's bosom" (Luke 16:22). If it were a parable, we would thus need to interpret the figures of speech to get to other figures, which we would then need to identify as to their meaning, thereby complicating things beyond the normal usage of a parable. Therefore, the story doesn't seem to be a portrayal of a real historical event, but at the same time, it has aspects that don't fit parables. I will comment on this more shortly.
Next, there are several issues that arise if we take the story literally. For starters, a conscious intermediate state would contradict other verses, such as Ecclesiastes 9:5, which says that "the dead know not any thing." Also, if the condition for entering bliss is to receive "evil things" while in the flesh, and the condition for entering torment is to receive "good things" while in the flesh, then Abraham himself would have been debarred from entering bliss and would have instead found himself in torment, for he was very rich (Genesis 13:2).
As I mentioned, the story doesn't seem to portray a real life event because it uses the language of a parable, but at the same time, it doesn't really seem like a parable either because it identifies real people. My understanding is that the whole story is the figure of speech called Admission, which E.W. Bullinger describes as "Admission of Wrong in order to gain what is Right" (see Figures of Speech Used in the Bible, page 972). One of the examples he cites is 1 Kings 22:15: "Go, and prosper: for the LORD shall deliver it into the hand of the king." Bullinger says that Micaiah through the use of Admission and irony admitted what was in Jehoshaphat's heart, and thus exposed and condemned it. I believe that Jesus was doing the same exact thing in the story of the rich man and Lazarus. In particular, on several occasions, He condemned the Jewish leaders for teaching the doctrines of men and invaliding the teachings of God (Matthew 15:9, 16:6, Mark 7:13). In the story, I believe that Jesus is reproving them for their love of money by using a contemporaneous notion of the intermediate state in order to lead them away from their false traditions and bring them back to Moses and the prophets (Luke 16:29-31).
In regard to some of the traditions that were believed by the Jews during the first century, I highly recommend reading Dr. Eli Lizorkin-Eyzenberg's article Rich Man and Lazarus: Real Life Events?, as well as pages 64 to 66 of Leslaw Daniel Chrupcala's book Everyone Will See the Salvation of God: Studies in Lukan Theology. As a supplement to those two works, I would like to make the following remarks:
Abraham's bosom is found in the funeral papyri and rabbinic writings (cf. papyrus Preisigke Sb 2034:11, Kiddushin 72b, Midrash on Lamentations 1:85). Abraham's bosom is also presented as the resting place of the righteous in 4 Maccabees 13:17. Based on this, we can understand why John said to them, "Bring forth therefore fruits worthy of repentance, and begin not to say within yourselves, We have Abraham to our father: for I say unto you, That God is able of these stones to raise up children unto Abraham" (Luke 3:8). The Jews notion of the intermediate state is found in the Apocalypse of Zephaniah in 9:1-5, "Then a great angel came forth having a golden trumpet in his hand, and he blew it three times over my head, saying, 'Be courageous! O one who hath triumphed. Prevail! O one who hath prevailed. For thou hast triumphed over the accuser, and thou hast escaped from the abyss and Hades. Thou wilt now cross over the crossing place. For thy name is written in the Book of the Living.' I wanted to embrace him, (but) I was unable to embrace the great angel because his glory is great. Then he ran to all the righteous ones, namely, Abraham and Isaac and Jacob and Enoch and Elijah and David. He spoke with them as friend to friend speaking one with another" (James H. Charlesworth, The Old Testament Pseudepigrapha). In those verses, the "abyss" could refer to the "great gulf" (Luke 16:26), which was he able to cross at the "crossing place" to escape Hades (cf. the place of torment in Luke 16:28). It also mentions Abraham, Isaac, and Jacob praying for those in torments in 11:2-4. I believe these citations show some similarities between the story of the rich man and Lazarus and the traditions and teachings of the Jews in Jesus' day. As I mentioned above, I believe Jesus was using the Jews' own traditions to reprove the Jewish leaders of their love of money. His ultimate goal was to bring them back to Moses and the prophets (verse 31). If they repented and returned to Moses and the prophets, they would have been set free from their traditions so that they could love their fellow man instead of money.
To conclude, the story of the rich man and Lazarus does not teach eternal (i.e., never-ending) torment and probably does not teach a conscious intermediate state between death and the resurrection.