So, you’re looking to save more money to support the income you need in retirement and are considering or want to revisit your annuities. As a retirement-income investment, annuities can help you grow tax-deferred savings until you’re ready to withdraw your funds, which you can start doing at age 59 1/2.
But, did you know that you have different income options to choose from? Deciding which annuity to invest in will depend on your unique financial and retirement goals — and your income needs. Here’s a breakdown of the different options available to help you make the right choices.
Payments That Last for Your Lifespan
• Life: This annuity option provides you with the highest payments possible per year, because they calculate the monthly payout on the annuitant. Once you die, your payments also end, meaning you can’t transfer these payments to your beneficiaries1.
• Joint & Survivor for Life: This annuity will pay you and your survivor monthly income for as long as you’re each alive. When one person passes, the survivor will continue receiving payments throughout their lifetime. Once the survivor also passes, these payments end immediately, regardless of how many payments they've received through the annuity up to this point. The monthly payment is lower than the Life Annuity, because it’s calculated based on both spouses’ life expectancies.
Payments That Transfer to Beneficiaries
• Life With Guaranteed Term: This annuity option provides you with an income stream for life — like the Life Annuity — but with an added benefit: You can also elect to have a guaranteed term for how long the annuity must pay you, regardless of whether or not you live for the entire term. If you pass away before the guaranteed term ends, your beneficiaries and estate can assume the remaining payments2.
• Life With Refund: This option allows you to receive monthly income for a guaranteed time period and throughout your lifetime. And, unlike the Life Annuity option, should you pass away before receiving all funds, you can transfer the remaining balance to a beneficiary or to your estate3. This beneficiary payout happens when you have paid more into the annuity than you received from the annuity during your life. Beneficiaries may even receive interest earned on top of the annuity difference4. Since these options vary, we’re here to help you determine which is available to you.
• Fixed Period: This annuity option allows you to select a set timeframe to receive payments, such as 15 years. You do receive higher monthly payments with this option, but you also risk running out of money if you live past your fixed period5. Some fixed-period options allow you to pass the annuity onto a beneficiary6, and some don’t7. So be sure to inquire about which options are available to you.
• Fixed Amount: With this option, you select the fixed amount (also known as “systematic withdrawal schedule”) you want paid to you each month. You receive that set amount for the life of your available funds, based on how much you’ve paid into your annuity. With this payment option, you may live past the end of your payments8. If you pass away before you've withdrawn the full amount, some providers allow you to transfer remaining funds to beneficiaries, and some don’t. So just like with fixed-period annuities, be sure to consult which options are available to you.
Knowing how much income you need to support your retirement goals — and which beneficiary options you do or don’t need — will help you select the right annuity income option for you.
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