Questions to Help You Decide on an Income Annuity
Choosing the right income annuity can be difficult. Here are some questions you should ask to help you decide on one.
How Does It Work?
Annuities are available with you paying a large lump sum or flexible payments made over time. Also, there are different payout options, such as monthly, quarterly, twice-annually, or annually.
Who Guarantees the Income?
The company you choose guarantees your income. Therefore, you are going to want to choose an industry leader or another reputable company. More prominent insurance agencies tend to be more trustworthy. You won’t have to worry about your income failing to come through by choosing one of these.
How Can You Benefit from It?
The main benefit is that you can eliminate the risk of you outliving your savings. However long you live, a stable income will be available to you. This benefit is available in all annuities.
What Other Advantages Are Included?
Your income annuity is more stable than stock markets. This is because you get a guaranteed income, unlike with investing. Therefore, you will have a steady income for the rest of your life. This can help you cover basic living expenses, and some plans will offer you a consultant who can help with budgeting.
What Is the Return Rate?
This is not a CD or other type of investment, so there is no fixed return rate. Instead, you get a set amount of money each pay period for the rest of your life. Therefore, the return rate is based on your longevity. With any plan, your return rate will be higher the longer you are alive.
How Soon Do Payments Begin?
The specific annuity you purchase decides if your payments begin immediately or later. Immediate premiums start within a year of you buying them. Deferred annuities can start anytime from shortly to many years after the purchase date. Often, flexible payment premiums are deferred until your total amount has been paid.
What Happens if You Pass Away Early?
This can vary based on the company you choose. Most income annuities will offer a death benefit. This is most commonly done through a cash refund. The refund works, so if you die before you have withdrawn your annuity’s purchase price, your beneficiary will receive the funds you have not used. However, there are other death benefits available.
You want to make sure you get the right annuity for yourself. Take some time to answer these questions to make the purchasing process a little easier.