There are several choices to consider when you begin looking at annuity payout options. The choice you make could be crucial in bolstering your retirement plans. Also, you may wish to consult a financial advisor before finalizing your retirement.
There are two types of annuities if you are considering periodic withdrawals over a time period. These are either an immediate annuity or a deferred annuity. An immediate annuity begins monthly income payouts directly after the purchase. A deferred annuity allows the annuity to grow over time and the withdrawals begin at some future date.
Annuity Payout Options
We will review the three more common payout options and what to consider in making a selection. Certain considerations can change which payout option will work best for you.
Life Annuity with Period Certain
The first is the Life Annuity with Period Certain. This option guarantees a monthly payment for a specified minimum number of years. However, if you live beyond the minimum number of years, your monthly income will continue for your life. In the event of an early, untimely death your beneficiary will receive income for that guaranteed minimum time period.
This option would have a lower monthly payout than a simple Single Life and Life-Only payout. However, the Life Annuity with Period Certain option might be selected if you were concerned about a beneficiary.
Single Life and Life-Only
This Single Life and Life-Only payout option is straight forward. It pays a guaranteed monthly amount for the rest of your life. In the event you die soon after selecting this option your bene
receive nothing. It offers a higher monthly payout than Life Annuity with Period Certain.
You might select this annuity payout option if you had no beneficiaries of concern and required a higher monthly payout while living. Also, this payout option would give certainty that you would not outlive your income.
Lump Sum Payment
The Lump Sum payment option is simply one large payout. You would then manage your money to meet your retirement needs. Issues with this option are your money running out before pa
ssing and a larger tax bill in the withdrawal year.
This could be the option that you would choose if you had serious health issues and a short life expectancy.
Period Certain Annuity
The Period Certain Annuity is a payout for a pre-selected time period. For example, you may select a 10 year monthly payout. This payout option might be used in a situation where both you and your wife are older with low life expectancies. If you have other funds saved in the event of outliving the payout this might be an option.
There are many issues to consider when reviewing annuity payout options. For instance, find out about the time limit and fees for early withdrawal penalties. Some early withdrawals may be allowed if under a specified percentage of the total annuity amount.
Other available annuity payout options are not explained here that may work for your situation. Be sure to discover all the possibilities with which ever insurance company you select.
Please contact the F. A. Peabody Life and Benefits Division to learn more.