It can be said that the biggest benefit of annuities is the potential to get an annuity income for you and your spouse for the remainder of your life or a pre-determined period of time. In the light of this, it really is worthwhile to consider the annuity income possible from different annuity types.
As an example, let us imagine a person has a sum of $60,000 to invest in an annuity. He is 70 years of age with a life expectancy of 16 years.
In the event a person wants a life annuity to generate lifetime annuity income, an annuity company will certainly offer a monthly annuity payment taking into account factors like gender, age, amount of investment, and the predominant annuity rates.
The assumption may be the person will die 16 years hence (the average for all 70-year-olds) and so they calculate the size of monthly payments that will be due. Nevertheless, the obligation is there to keep paying annuity income if our investor lives to age 120.
Let us look at the various factors that impact the annuity income:
Age - Assuming the annuity installment is $385 per month and the person is 70 years old. The remaining estimated lifetime is 16 years. However, if your investor were age 80 and starting his lifetime payments with an 11 year life expectancy, the annuity company would pay out $554 monthly since they will be statistically obligated for fewer months.
Gender - Statistics have regularly shown that women outlive men and a 70 year old woman has a remaining life expectancy involving 20 years. This means the number of annuity payments will be higher for the insurance company. Presuming her to be 80 years aged, her monthly annuity income is just $498 - less than the 80-year man in view of the woman's longer life expectancy.
Is the spouse also covered? - It is suggested that a wife and husband may choose a survivorship contract where annuity income will be made right up until the surviving spouse is deceased. Assuming that both the spouses are usually of the same age (we will assume age 70), the annuity company would pay $318, given that statistically, as stated earlier, the female tends to live longer. The annuity payment will remain the same even if one partner dies.
If any single 70-year old person opted for annuity income for a period of 10 years (called a "term certain" annuity), he'd receive $515 monthly in keeping with the existing rates, regardless of gender. If the investor dies prior to the 10th year, the annuity company would continue the annuity payments through the 10th year to his beneficiaries.
Immediate annuities might be defined as the remittance of a single premium to an annuity company in return regular annuity income payments throughout a pre-determined number of years, or life. But, as soon as annuity income commences, the annuity can't be surrendered for value. With regard to tax purposes, the income is in part treated by the authorities as ordinary income and the remaining as return of capital. Note that distributions form annuities, other than lifetime payments, are assessed a 10% fee if the recipient is below 59 ½ years. Guarantees are obviously based on the claims-paying capability of your insurance company. Consider annuities as long-term investments with for growth of capital of for a stream of annuity income.