You can’t beat an annuity when it comes to setting up an effective savings plan for your retirement. An annuity can ensure you’ll receive a steady stream of income in your golden years.
You’re guaranteed to receive payouts from your annuity (in most cases) so you can depend on those dollars when you retire. And more good news – you have options when it’s time to receive payouts.
You can choose from these options:
1. Period certain payout. This type of annuity payment guarantees you a specific amount monthly (or yearly) for a specific time period.
* For example, perhaps you select receiving $2,000 monthly over a twenty-year period. If you die before the twenty years passes, your surviving beneficiary would continue to receive the monthly payments for the rest of the twenty years.
2. Lifetime payout. This type of payout continues level payments throughout your life. Insurance actuarial figures are used to determine the amount of your payments, based on your age, health, life expectancy, and the total amount you paid into the annuity.
* This option is great for a long life – you can’t run out of money. However, if you die shortly after starting the payments, your beneficiaries get nothing under this option.
3. Lifetime with period certain payout. This type of payout is a blend of the period certain payout and the lifetime payout.
* As long as you live, you’re guaranteed to receive payments. Plus, the payments are also guaranteed for however long you choose when you make the option. If you die before the period is up, your beneficiaries receive the payments for the rest of the period.
* For example, if you choose lifetime with a 15-year period certain payout and you die in the tenth year, your beneficiary will receive the payments for five more years.
4. Joint and survivor payments. This type of payout allows you to elect to receive a lesser payment over your lifetime so that your surviving spouse can continue to get payments until their death as well. Married couples often select this type of payout.
5. Lump sum payout. When the time comes for you to start drawing on your annuity, maybe you want your annuity dollars all at once. If that’s the case, you certainly have the option.
* However, it’s important to consider the tax disadvantages of this type of payment. You’ll have to pay taxes on the amount you withdraw, so you might be looking at a hefty tax bill.
* The lump sum payout is not a recommended choice by financial experts.
6. Self-selected systematic withdrawals. This type of annuity payout is different than the others because you decide how much you want to receive and when. Of course, the insurance company can’t guarantee you’ll receive lifetime payments if the amount you choose is higher than the insurance company projects that you can be paid over your lifetime.
* This method is risky because even though your monthly payments may be high, the funds might also deplete before you die.
7. No payouts. If you’ve amassed plenty of money to live on in your retirement without accessing your annuity, you don’t have to take any payouts at all. What this means is that all the money in your annuity will pass to your beneficiary upon your death.
Regardless of the type of payout you select, double-check the beneficiary information on your annuity documents to ensure the correct beneficiary is named along with their up-to-date contact information.
So you have plenty of choices when it comes time to start receiving payouts from your annuity. Assess your needs carefully before you choose an option so that your annuity will serve you well.