Consumers who need a guaranteed, stable monthly or yearly income will establish an immediate annuity account. Also know as an annuitization or an income annuity, these accounts provide a systematic payment for a specified period of time to the owner and the named beneficiaries. The payments will consist of principal and interest and continue for the term selected.
Several factors will determine the monthly payout including the annuitant's age and gender, amount invested, current interest rates, payout duration, and whether the owner(s) wants the payment to be adjusted for inflation.
Annuity Terms to Choose From
One of the first options to determine is the duration of the income stream. A client might only need income for ten years as part of a structured settlement or litigation award. In this case, an initial deposit can be calculated in order to determine a guaranteed monthly payment for ten years.
In other instances, clients will need guaranteed income for their lifetime. This is known as a life annuity and it is guaranteed to make payments for the life of the annuitant(s). Life annuities are often structured with a period certain to guarantee return of premium to the owner(s).
Life Annuity with Period Certain
For example, if a client owns a life annuity with a 20 year period certain then the income payment would be guaranteed for at least 20 years should the owner pass away prematurely. The remaining payments would be transferred to the recipient indicated on the policy. insurance companies will provide a rule for a certain period of up to 50 years. However, the longer the period required some, the lowest monthly payments.
An annuity, at no time will be the largest monthly payment to the owner. This type of account is best for those who need a maximum monthly income, but that is not with the provision of services to an interestedbeneficiary.
Income Payments Adjusted for Inflation
Younger annuity owners may desire a payment that can be adjusted for inflation on a yearly basis. Most common are accounts that will increase monthly payments by a compounded rate of 3% or 5% year over year. Monthly payments in the first few years will be smaller than an income annuity without an inflation rider, but will increase substantially over time.
Income payments compounded at a desired percent take into Account the value of money over time. Payment $ 1000 per month can not buy today, worth $ 1000 in goods and services 20 years ago. Inflation protection can be reassured consumers when they get older, especially if they have invested in an annuity grow.
In conclusion, the purchase of an annuity for the care of future needs to take control. Shopping for the best is as important as the choice of the term and the driver of inflation. With the help of an experienced agent, annuities --income planning can be designed to provide for a lifetime's worth of needs. It is best to work with an agent who can provide quotes from several well rated carriers as payouts can differ significantly depending on the annuity parameters.
Learn more about income annuity accounts.
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