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What Is Annuity? A Look at Lifetime Annuity and Its Features

If you’re asking about what is annuity, there’s the need to explore all the possible avenues about the subject. Annuity is very verse especially when you consider the avalanche of information   on the topic. There are several pieces of information you need to know about its types and their features.  Lifetime annuity is one of the several aspects you need to understand. Let’s examine what it stands for in this write-up.

Actually, Lifetime annuity   is known for its reach offers and benefits.  It’s simply a kind of annuity that pays you a specified income amount for the rest of your life. It’s a kind of contract you enter with an insurance company.  You invest your lump sum of cash and allow it to work for you. The insurance company will be paying you   dividends all through your life time.  This kind of annuity is very common among several insurance companies in the US.   Many people who want to enjoy steady flow of income during retirement like going for it.

Actually, Lifetime annuity demands a lot from the investor. You’re expected to use your pension fund for the investment process.  When you do that, the insurer will then agree to pay you regular income from the returns coming from the pension fund invested.  In most cases, the income payment can be made quarterly or monthly. It can also be made yearly or twice in a year.  There are terms and conditions that apply to the investment. You need to check them out before investing.

Oftentimes, lifetime annuity is also known as “immediate annuity”.  Normally it begins with a unique proposition.  You’ll hand over a lump sum to the insurer of your choice.  In return, the insurer pays you a guaranteed amount for a specified period of time. This can last for the rest of your life as well.

You need to know that your initial investment   will no longer be paid you. It belongs to your insurer after your demise.  However, the income payments will still continue for life. Your beneficiary receives that after your death.  Your spouse or child   can be the beneficiary. You have to include that at the initial signing of the contract. You also need to intimate your beneficiary about your investment at all times. This will help him or her to pursue the income payments in case the insurer begins to misbehave.

In getting to know about what is annuity, you’ll discover that Lifetime annuity has a lot of benefits.  In the first place, you’re sure of steady flow of income through the pension fund you invest.  You can also choose when to receive the income payments. You can also decide to leave the payment   until a certain period in your retirement state.  You can equally decide to have access to your income payment once or twice a year.    In fact, lifetime annuity is very flexible.  You’ll always have the right to make choices.

Meanwhile, there are some negative aspects of lifetime annuity.  When studying about what is annuity, you must not forget to look at the dark sides.  Lifetime annuity is always taxable. You’ll be paying tax all through the period of the annuity.  This can reduce the amount of income payment you’ll be receiving.  In any case, you should always be properly guided by a good financial adviser before you think of choosing this kind of investment option.

What is Annuity? A Look at Immediate Annuity

Annuity has always remained a veritable means of generating steady income for retirement. If you succeed in discovering what is annuity and how it works, you’ll always have a good time when you retire. It’s basically a contract you enter with an insurance company whereby you invest you lump sum and expect the company to pay you income returns at regular or deferred intervals.

Annuities have various forms or types.  Immediate annuity is one of the types you must know a lot about.  It’s a unique investment option that allows you quick access to the investment you make within a short period of time.  In several quarters, it’s also known as payout annuity.   The regular premiums you invest in the immediate annuity are not paid upon your death. On the other hand, you’ll be receiving regular income payment until death.

In most cases, immediate annuities begin to pay right away once you’ve made the initial purchase payment.  People who are ripe for retirement usually go for such investment options. You can easily enjoy steady means of income once you invest into the annuity.  If you’re already having a deferred annuity, you can request it to be converted into immediate annuity so that you can reap immediate income returns.

There are benefits that come with immediate annuity. It’s always important you look for benefits each time you take a look at what is annuity.  Immediate annuity usually begins to pay right from the time you make the initial investment.  This can help you not to outlive your investment when you eventually retire. You simply keep on receiving the income payments right from day 1 to the time you retire.

You also have the option to choose fixed immediate annuity.  This option ensures regular income flow at fixed intervals.  The income will also keep flowing for several years even before you retire.

Immediate annuity can prevent you a lot from worrying about your investment since you’re sure of receiving regular payments from it.  You’ll always have enough cash to settle your expenses. You can easily pay your bills and also enjoy regular shopping since you’ll always have access to cash.

If you also opt for a variable immediate annuity, you’ll still gain. You’ll have to reserve the buying power of the investment ahead of any inflation that may spring up anytime.

Having seen the benefits of immediate annuity, there’s also the need to check out the negative aspects.  In the first place, there’s a possibility of paying high charges when you go for immediate annuity.   If for instance you go for a fixed immediate annuity, it guarantees you a set of payment for a period of time.  Yet, you’re likely to live longer than that specified period. This may force you to lack regular income flow.  Inflation may also cause your fixed payment to change over time.  This will then reduce the amount of income payment you’ll be receiving.

In any case, there’s always the need to be well informed before getting into any kind of annuity investment. Always engage a good insurance agent to help you out.

Watch Your Back – Know When to Sell your Immediate Annuity

Some types of immediate annuities can be sold by their owners to interested buyers or investors. Annuities are usually sold in the secondary market where owned security properties can be sold or traded. For the purposes of this book, the immediate annuity is divided into two types – the qualified and non-qualified annuity. This division is based on the type of funds or assets that are used to purchase the annuity contract.

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Qualified Immediate Annuities

Qualified immediate annuities are annuities considered as a retirement account that goes through certain requirements under taxation laws. This kind of immediate annuities, which are also called retirement annuities, are not allowed by the Internal Revenue Service to be sold by annuity owners. These annuities are classified as Roth individual retirement annuities and are non-transferable. They are purchased from pre-tax assets, which means that the value used to purchase the annuity was not yet subjected to taxation. Therefore, the regular income received in qualified annuities is taxable.

Annuity rates in qualified contracts generally apply to both the female and the male sex. However, some states require different rates for females and males.

Non-Qualified Immediate Annuities

Non-qualified immediate annuities are purchased with after-tax assets. This means that the money used to purchase the annuity had already been subjected to taxation. Therefore, a part of the income from non-qualified annuities is measured, using a particular exclusion ratio, as a return from the annuity principal (which had already been taxed). This part of the annuity income is exempted from tax. Examples of after-tax assets are earnings from the sale of a private property (like your house), Certificate of Deposit, proceeds from a previous life insurance policy, and mutual funds.

Non-qualified annuities are not considered as retirement accounts and are transferrable. Because they are transferrable, some states allow annuity owners to sell their accounts or contracts. When an annuity owner sells his/her annuity, he/she will receive a lump sum payment from the buyer of his/her contract. After the sale, the person who bought the annuity contract will be the one to receive the remaining income (usually every month) from the annuity.

Annuity rates in non-qualified contracts are generally different for females and for males. There are some states, however, where unisex annuity rates are required.

Reasons Why Annuitants Sell Their Annuities

Most annuitants who sell their annuity contracts want to get a lump sum payment instead of receiving a monthly income. Generally, they are young annuitants who do not have to save for long term goals – like retirement goals. On the other hand, older annuitants (most of them retirees) generally do not sell their annuities because they want a stable source of income that can last as long as they live.

You might want to sell your annuity contract because you badly need a huge amount of money as soon as possible. You might need to pay off a debt or to purchase a house. In this case, you might opt to sell your annuity so that you can collect the amount of money you need at the moment.

Look Before You Leap

Depending on your current situation, selling an annuity can be advantageous.  It does not mean, however, that you should do something just because you are allowed to. Make sure that you will make an informed decision. Ask help not only from your family and friends but also from annuity experts.

In selling your annuity, you have to keep in mind that you will not be able to get the full value of your annuity account. Generally, investors will only be interested if they will profit from the transaction.

Types of Immediate Annuity – Determine Which Is the Best for You

If you are preparing for your retirement, buying an immediate annuity might be the best investment for you. This type of annuity has two basic types – the Fixed and Variable annuity.

The immediate annuity is appropriate for you are already close to retirement and you want to get for yourself a regular and stable income. This type of annuity allows you to immediately receive income for a certain period of time or for as long as you live. You can start receiving annuity income immediately after you have given your payment for the annuity.

Immediate Fixed Annuity

In fixed annuities, you are going to be paid a fixed income every month from the date you decide to start receiving money. The rate of return you will receive is fixed and will not change no matter what happens to the economy or to the stock market. Thus, if you are afraid of market downturns, recessions, and economic depressions, the fixed annuity is appropriate for you.

One of the chief advantages of the fixed annuity is tax deferral. Income from a fixed annuity is tax-deferred. The fixed annuity owner’s investment is exempted of any tax while it is still accumulating. Taxes are charged only when the owner, or his/her beneficiaries, decides to withdraw money from the annuity. This feature allows you to make your money grow faster. In addition, you are given control over when to pay your tax. Because you are only charged with tax every time you withdraw from your annuity account, you are in control of when to pay your taxes.

Moreover, taxes can be postponed when the owner of the annuity dies and he/she named his/her spouse as the beneficiary of the annuity account. The turning over of the account is carried out without taxation. Moreover, the spouse (the beneficiary of the original owner of the annuity), can also transfer the annuity to an heir who can have as long as five years of additional tax deferral.

The fixed annuity is a stable investment especially designed for retirement purposes. If you are retiring soon, the immediate fixed annuity is the best choice for you.

The Immediate Variable Annuity

In variable annuities, your money is invested in stocks, mutual funds, and bonds. Thus, the monthly income you receive is dependent on the condition of the economy and the stock market. If the stock market rises, the rate of returns you receive from a variable annuity will increase. On the other hand, if the stock market falls, your annuity rate of returns will decrease. It goes without saying that variable annuities involve greater risk than fixed annuities. However, with greater risk comes a higher possible return. If you do not fear the fluctuations in the stock market, the variable annuity could be a good choice of investment. Just like in fixed annuities, income in variable annuities is tax deferred. You can choose between getting the returns on a short term basis or on a long term basis.

The type of immediate annuity you choose depends on your goals and your priorities. If you are still in the process of accumulating money before you retire, you are more likely to invest in immediate variable annuity. One the other hand, if you have already accumulated enough money that will last from the day you retire to the day you pass away, you are more likely to invest in immediate fixed annuity because it gives you a stable monthly income. Where you put your money is an important decision. Before you decide on the type of annuity to invest in, weigh your priorities, you goals, and all the possibilities.

The Immediate Annuity Glossary – All the Terms You Should Know!

A lot of uncommon terms are used in annuity contracts. This immediate annuity glossary defines the terms you should know for you to be well-informed.

1035 Exchange

The 1035 exchange is the term used to refer to the tax-free transfer of an annuity contract from an insurance company to another insurance company.

403(b) Plan

The 403(b) Plan is basically similar to the 401(k) Plan, but it is generally offered by nonprofit organizations. This plan allows retirement savings plan contributions from the employees to grow on a tax-deferred basis until they are withdrawn.

Account Value

Account Value refers to the total value of the annuity. That is, the sum of the principal and the interest.

Amount Certain Payout

In the Amount Certain Payout, the annuitant decides how much income he/she will receive monthly then the insurance company will decide about the length of time he/she will receive income.

Annuitant

The annuitant is the owner of the annuity account.

Asset Allocation

Asset allocation, used in variable annuities, refers to the distribution of assets across multiple classes in order to meet an individual’s financial goals in terms of risk and length of investment.

Back-End Charge

Back-end charge, also called surrender charge or withdrawal charge, is the fee that an annuity owner pays to the insurance company for withdrawing money from the annuity before the appointed date.

Bailout Provision

Bailout provision allows a fixed annuity owner to withdraw all of his/her annuity funds without a withdrawal charge when the interest rate unpredictably falls below the rate specified in the contract.

Balance Inquiry

Balance inquiry is a tool available online that allows annuity owners to check the balance of all accounts held within an annuity.

Benchmark Index

Benchmark index, also called stock index or bond index, measures the performance of market allocations in a variable annuity.

Beneficiary

The beneficiary is the person chosen by the annuity owner to receive the annuity income and benefits upon his/her death. This is typically the annuitant’s spouse or children.

Bonus Rate

Bonus rate, also called bonus annuity, premium bonus, or first-year bonus rate, refers to a feature common to all kinds of annuities. In this feature, the insurance company basically adds a certain amount of money to the annuity owner’s account during the first year. This additional money, or the bonus, can be given in the form of a higher interest rate during the first year, or a partial premium match by the company.

Death Benefit

The death benefit is the amount given to the annuity beneficiary or beneficiaries upon the early death of the owner of the annuity contract.

Dollar Cost Averaging

Dollar cost averaging is the investment of a fixed amount of dollars at regular intervals in a variable annuity.

Enhanced Dollar Cost Averaging Program

The Enhanced Dollar Cost Averaging Program provides a higher interest rate in particular cases, like new minimum purchase payments within a limited period of time.

Exclusion Ratio

In an immediate annuity payment, exclusion ratio is the ratio of taxable to non-taxable proceeds.

Expense Ratio

Expense ratio is the percentage of an annuity account that is paid for insurance and investment charges every year.

Issuance Age

Issuance age is the age of the annuitant when the annuity policy was issued.

Life Only Payout

In the Life Only Payout, the stream of income stops when the annuitant passes away.

Life with Period Certain Payout

In the Life with Period Certain Payout, the annuitant receives a steady stream of income for a certain period of time (can be for 5 years, 10 years, 15 years, 20 years, 25 years, or 30 years)

Yield

Yield is the term used to refer to an annuity’s rate of return.

Pros of Immediate Annuity – Bite Into The Bright Side!

Almost everything in this world possesses their own dark side and bright side. Immediate annuity quotes are no exception in this. In buying an immediate annuity, try to look in its bright side and not only in the dark corners of it. Even if immediate annuities have its cons, the pros could always outweigh it all making your purchase a worthy one.

Immediate annuity quotes present benefits and advantages. It offers many things right just in front of you. If you want security, immediate annuities may be the answer for you. Depending on your circumstances, they could provide a guaranteed flow of income, which you can outlive, or you can receive for a period. With immediate annuity, you may not have to worry about your financial stability for a period because the immediate annuities.

Immediate annuities also bid effortlessness and easiness. For a very long time, you are exerting so much effort in your work. After your retirement, you can achieve both of this if you buy an immediate annuity. Why so? Stacking your money in a safe place requires effort and a lot of monitoring. Immediate annuities will do it all for you the moment you sign a contract. Your money is safe and then you are at ease that you invested in a secure place. You also do not have to deal with investments reports or stock market performances because the company handles it all for you.

The taxation of immediate annuity is one of the alluring features of immediate annuities. No matter how you avoid tax, you will definitely face it somehow. In immediate annuities, taxes are deferred for a moment. Your money is stacked in a place where the tax can get no hold of it. It will only be taxable the moment your money is withdrawn. Not all of your money in immediate annuity is taxable too. Only the interest is considered as income. The principal is nontaxable because of the initial investment. You still pay tax. But so what? You can still save a lot through immediate annuities anyhow.

In immediate annuities, you are given a chance to be flexible. Flexible in a way that you are able to choose between many options in payments. How you want to be paid is how the company is going to pay you. If you want to be paid for a specific span of time only, there are different types of annuities you can choose. If you want a lifetime flow of income, you can have it. If you prefer fixed annuity or variable annuity, it is up to you. The company will back you up whatever kind of annuity and investment you opt for.

The payment is not the only one that can be flexible adjusted in immediate annuities. There are still more options you can choose from. You can definitely pick what kind of immediate annuity that suits your need the most. There are the single-life annuities and joint life annuities, which could be periodically, or lifetime based.

The returns that annuitants receive are higher in immediate annuities. The rate of interest immediate annuities offer to their clients are generally higher than any other investments’ rates like Treasury and CD rates. In every payment, a portion of the principal is given back along with the interest rate, which makes the annuitant receive a high amount of payment.

The customer is always right, they say. Make sure to set your decisions right this time. Now that you have looked on some advantages immediate annuities can offer you. There are a lot more out there. Find it out yourself.

Thorough Guide to Understand Single Premium Immediate Annuity

Finances are a hard thing to manage, whether it is during the younger years when an individual is working, or after retirement when they have no longer get a monthly check from their employer. The difference is that before retirement, the income is fixed, while after retirement, this may not be the case. The secret is to ensure that you invest properly so that the years after retirement are stress free and one can still have enough money to survive as well as to take care of any business that may arise.

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One of the options open to the investor is an annuity, and at this point the investor may be wondering, what is annuity? This is an investment option in which the investor agrees with an insurance company by way of contract that they will pay a certain amount of money, and receive regular payments after a certain period of time.

The investor who inquired what is annuity is definitely interested at this point, and may want to know some of the various types of annuities. One of the more popular types is Single Premium Immediate Annuities, and this option is mostly suited for individuals who have already retired. It involves paying one huge lump-sum to the insurance company at once, after which the insurance company begins paying a certain amount of money immediately after all the paper work is completed, usually within thirty days.

This option is interesting, especially for the individual who may have a lot of money, may be because they won the lottery or because they received their pension, and they would not like to spend it all in one store. At this point, the investor who asked what is annuity will want to know more. To explain further, this type of payment exists in two different types; in the first one, the individual receives a fixed payment every month, while in the second option, monthly payments are different depending on the performance of an investment.

The purpose of a Single Premium Immediate Annuity is to ensure that the individual is able to have a stable income after they have retired. The individual who inquired what is annuity may want to know if there are certain benefits to purchasing this type of annuity. The first benefit is that there is an inflation cushion in this type of annuity, especially if you choose the one in which payments are dependent on the performance of underlying mutual funds and stock. This is because this investment options depend on inflation, and if there is inflation, they may increase in value and so will the investor’s annuity.

Also, the investor is guaranteed to get money for the rest of their life and they will never outlive their investment, and this investment will not decrease in value, but there is the possibility that the value may increase. This type of annuity is a wise choice for individuals who have a lot of money which they would like to use wisely without the risk of squandering it, but who would like to start using it immediately, especially if they are retired.

How Life Annuity Works – Pros and Cons

Annuity for retirement has always been the best investment option for anyone who truly desires to enjoy steady inflow of income during the retirement period. There are specific forms of annuity you can always explore.  Life Annuity is one of the best options that come with lots of benefits. Let’s have a look at what it stands for.

Lifetime annuity is a kind of annuity for retirement   that pays you specified amount of income for the rest of your life period here on earth. It’s a kind of contract between an insurance company and the individual involved.  You have to choose a reliable insurance company that offers such kind of annuity. In most cases, many insurance companies that offer   annuity for retirement are likely to offer the lifetime annuity policy. It’s known to be very common all over the insurance industry.

In Lifetime annuity, you’re expected to invest your pension fund as may be agreed between you and the insurance company.  Usually, the insurance company pays you a regular income in return for the pension fund you invest.  The income can be paid monthly or quarterly. It can also be paid   yearly or twice in a year. You have to choose the best payment plan that can suit you.

Lifetime annuity can be referred to as immediate annuity.  It usually begins with a proposition.  You as the investor will hand over a lump sum of cash to the insurance company of your choice in exchange for a guaranteed payout for a specified period of your life.   In most cases, your initial investment is likely to go to the insurance company after your death.  However, the payments can still be continued to your spouse if you’re married or to   your dependant.

The Pros

Lifetime annuity for retirement comes with various benefits. Apart from the returns you have from your pension fund investment, you’re also sure of other unique benefits.  For instance, you can choose when to receive your payments.   You can equally decide to leave the income the same for the rest of your lifetime or you can decide to have it increased per year.

Again, you can also include a guarantee to allow payments to be made for a specified period of time even if you happen to give up the ghost within that same period. Simply put, Lifetime annuity is very flexible. There’s always the room to make choices.  You can even choose whether the income stops coming in at your death or whether it has to continue with your spouse or any other person you may leave behind.

The Cons

Lifetime annuity as a form of annuity for retirement is taxable. You’re expected to be paying tax all through the period of the annuity.   You may have the challenge of making your saved money lasts as long as you desire especially after piling it up for years.

In all, there’s always the need to enter into a formal contract with the insurance company you’re dealing with. There’s also the need for you to take your time in locating a reliable insurance company that can offer you the best of annuity for retirement. You’ll always gain a lot if you locate the right company.

Is the Immediate Annuity Recommended For Retirees?

Immediate annuities present a great number of advantages for retirees. There are many other insurance and investment options that you can choose from in the market. There are no doubts about that. But why it has to be an immediate annuity? Is it really recommendable for you?

retirementsannuity   Annuities like immediate annuities are basically designed for retirees. They aim to secure their financial stability for their future. Immediate annuities are great forms of investment for those who have just got retired from their jobs.

Why choose immediate annuities over other forms of insurance like life insurance? Well, at old age, life insurance is not that recommendable. It is better to start off at a young age if you are planning to have a life insurance. Because you are already old and probably have health problems, there will be great issues in your life insurance. In contrast with life insurance, annuities are designed for those who are nearing retirements and to those who are retired already. Buying at a young age is not ideal when it comes to annuities. Even though age and gender will also be examined here, it works differently with life insurance. If your life expectancy passed above the average rate, then that’s just it. So if you are retiring or a retiree already and do not have insurance yet, annuities can serve you right.

There are other kinds of annuities out there but why immediate annuities? Yes, there are other kinds of annuities available but you really have to consider first your financial status as of the moment before choosing one like deferred annuities. These kinds of annuity give you payments but not immediately after you purchase. If you think you don’t need your money right away, then it is fine. However, when you are already retired, the income you used to have when you’re working is not the same. It could be lesser and not enough to cover all of your expenses.

And, if you have dependents or beneficiaries, immediate annuities can actually be a great help to you. You no longer have your job but you still have obligations to your family. You and your family’s need do not stop at any moment. They actually build up as time passes by. Your child or grandchild may be needing college tuition fees or some emergency may occur. With an immediate annuity, you can take that burden off from your shoulder. The payment that comes in chunks may not be enough to cover everything that you need but at least, the amount of money you receive eases what you need at that time.

Buying an immediate annuity is like buying your own pension. All you have to do is pay a lump of money to an insurance company and you will start receiving chunks of payment for a period of time. You may save a lot here. Just think of the interest rates you get payment after payment aside from the return of your principal payment. You are getting a lot from it actually. At least, your investment does not go to waste.

When the matter of retirement is the issue, you cannot avoid thinking on how you will save or invest your money in a right and safe way.  Now that you know that immediate annuity quotes are your best bet, give it a shot right away. Get free immediate annuity quotes here by entering your zip at the top of this page, followed by some basic information. We recommend that you do it immediately.