You will find there's range of fixed retirement annuities and you can make your choice. Nonetheless, each type of fixed retirement annuity has its own benefits. A fixed retirement annuity offers a consistent income and mostly preferred by persons who are retired.
Note that fixed annuities typically have two phases. The first phase is called the accumulation phase and is the period when you're investment grows in value. Then, should you opt to have the insurance company make payments to you from that accumulated value, the payment period is called the annuitization phase. Retirement annuities do not have an accumulation period. As soon as you make your investment, you begin to receive payments.
For the annuitization phase, there are principally two kinds of fixed retirement annuities: life annuities and term certain annuities. The life annuities give a predetermined amount for, usually monthly, until the investor dies. As regards term certain retirement annuity, the particular company pays a fixed amount every month (or any specified interval) till the annuity term runs out. This term period may be several years: 5, 10, 15 or 20 years.
Term certain retirement annuities for a fixed period of years are not purchased that often as most people are after the security of a lifetime income. however, term certain annuities do have an important advantage over life time annuities. If the annuitant passes away before the end of the term, then the beneficiary continues to receive the payments through the end of the term.
In the case of a life retirement annuity, the size of the monthly payments is based on the annuitant's expected lifespan. The older the investor, the smaller the life expectancy, and the larger the monthly payments. As an illustration, if two individuals age 60 and 80 years-of-age pay the same amount of premium for a retirement annuity, the 80-year-old individual gets a monthly check for a bigger amount as he/she will have a new shorter lifespan. For a $50,000 premium, the 60-year-old gets $261 monthly and the 80-year-old gets $479 monthly (based on their respective life expectancies, they will both get the same amount).
Yet another option is to have the retirement annuity payments stretch over two lifetimes. A joint life annuity (i.e. husband and wife) continues payments until the second party dies. Because the annuity company will actuarially be making payments for a longer period of time than on one life, the payment amounts will be lower.
Another option is to have the annuity company take into account your health profile. A health-adjusted retirement annuity may be described as the straight life annuity that calculate your life expectancy based on your health profile. Based on the health condition and shorter life expectancy that may ensue from ill-health, your annuity company will make bigger monthly payments. Strangely enough, for this type of annuity, bad health is a financial blessing.
These are a few of the options available with a retirement annuity. Talk to your financial advisor as there are other options not covered.
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