It can be said that the biggest true blessing of annuities is it offers you using regular and consistent annuity interest for you and your spouse for a period of years that you choose or for life. The questions is how much annuity interest can you get in today's environment (9/20/2011)? That depends on which options you choose for receiving annuity interest but we will show you all of them.
To illustrate current annuity interest rates and payments, lets assume an investor, age 65, Max, investing $100,000 into an immediate annuity. Actuarially, he has a life expectancy of 17 years. His spouse, Samantha, also age 65, has a life expectancy of 20 years.
In the event that Max wants a life annuity for himself, an insurance company will calculate a monthly annuity payment accounting for gender, age, amount of investment, and the current annuity interest rates. The assumption will be that Max will die in 17 years. The annuity company knows this is an accurate average for all of the 65-year-old customers and do not need to be concerned that Max as an individual may live longer or shorter. Nevertheless, the obligation is there to keep producing annuity interest for max as long as he lives.
Let's see what annuity interest we can obtain under various scenarios:
Age of the individual - Max, a 65-year-old male, will receive $589 per month based on the average life expectancy of 17 years. To illustrate the effect of age, if Max were 75, he would receive $784 monthly annuity interest. The present value of the payments is no different for the insurance company as they use the same annuity interest, but a 75-year-old has a shorter life expectancy and thus will receive fewer, but larger payments.
Gender - Statistics have consistently shown that women outlive men and Samantha has a remaining life expectancy of 20 years. This means monthly annuity obligations will be over a longer time for the insurance company. Again, the insurance company will use the same annuity interest rate but a longer payout period. If she were the annuitant, she would receive $543 monthly, $46 less than her husband.
Joint Life - It is suggested that a husband and wife may choose a survivorship contract where annuity interest will be paid until the surviving spouse dies. Assuming that both the spouses are generally of the same age, in this case 65, the annuity company would pay $489, considering that statistically, as stated earlier the female spouse will live longer. The annuity payment will remain unaffected even if one partner dies.
If an unmarried individual opted for annuity installments for a period of 10 years, he receives $907 in keeping with the current annuity rates. In the case of a period certain annuity and the annuitant's death, the annuity company would continue to pay the beneficiary the remaining obligations for up to 10 years. The payout will be the same for either gender with a period certain annuity payout.
Immediate annuities might be defined as the remittance of a single premium to an annuity company to enjoy regular periodic obligations throughout a pre-determined number of years. But, after annuity interest payments commence, the annuity may not be surrendered for value. Regarding tax issues, the income is in part treated by the IRS as annuity interest taxed at ordinary rates and the remaining as return of capital.
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