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| Minimum Gurantees - Explained 08/31/2010
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The Case for Fixed Indexed Annuities 08/31/2010 Why are people suddenly starting to invest more an more money into Fixed Indexed Annuities. The answer is because it makes a lot of sense in this type of rate environment. People th [ ... ] |
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What Is An Immediate Annuity
An immediate annuity is the oldest kind of annuity today, These types of annuities have been around since the Roman Empire. Immediate annuities provide the buyer with a fixed stream of income for as long as that person shall live in exchange for one lump sum payment. The amount of income that buyer will receive will depend upon a number of different factors; Age, Sex, Initial Dollar Amount, Time until income is needed, and Payout Options.
Lets first look at why each of these factors are important.
Age; The younger a person is the longer that stream of income is going to be paid out. Conversely, if a person is older we would expect the stream of income to be much less. Obviously none of us know when someone is going to pass away but age can be a good indicator on how many payments a person will receive throughout their life. In short, the younger the person is, the less money they can expect to receive monthly. The Older the person is the higher the amount they can expect monthly.
Sex; Women tend to live longer than men, i.e they have a longer life expectancy. Because of that given the same initial contribution a woman would receive a smaller amount of money each month because of her longer life expectancy.
Initial Dollar Amount; This is pretty straight forward. The more money you deposity the higher the amount of monthly income you will receive.
Payout Options; There are many different payout options available when choosing an immediate annuity. The most basic annuity payout option is what is known as Single Life or Straight Life. Essentially the owner "Annuitant" of the contracts will receive a monthly payment for as long as they live. If the Annuitant dies the day after purchasing the annuity the insurance company would keep the money. If she were to live to be a 118 the insurance company would be forced to pay her until death. This option provides the highest monthly benefit .
Another option is what is called a period certain option. At time of purchase you have the option of choosing how you want to be paid. If you were worried about the possibility of dying early and disinheriting your beneficiaries you may elect to have a 5, 10, 15 or 20 year period certain. By electing this option you are guaranteed to recieve payments for at least that long. For example if you choose a 10 year period certian and live 30 years after receiving your first payment your payments would stop since they went for a minimum of 10 years. Conversley if you were to pass away in year 2 the insurance company would be obligated to pay your beneficiaries for the next 8 years.
Other options include; Joint Life (husband and wife) and join life period certain.
Please contact us for further questions.
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