An annuity's goal is to provide a steady income during retirement. An annuity is a tax-deferred fund that can only be withdrawn after 59 1/2. Annuities can be customized to meet the needs of each buyer. You can also choose whether you want a lump sum or a series of insurance payments. Also, you can choose when you wish to annuitize your contributions, i.e., receive payments. An immediate annuity pays out immediately. A deferred annuity starts paying at a future date.

You can also choose to have the payments for a specific period of time. You have the option to receive payments for a set period, such as 25 or more years. While securing lifetime payments may lower the amount of each check, it will help ensure you don't outlive any assets. This is the main selling point of annuities.

Common Annuity Payment

Life-Only Annuity payments

The life-only payments you receive will continue for as long as your body is alive. They cease immediately after your death. The guaranteed payments will continue even if you die within 40 to 50 years. This applies as long as the insurance company is in business.

You can choose a life-only policy and start receiving payments. However, the insurance will not return any of the principal to your heirs if you die one year later. There may be an option to buy a principal refund option. This will likely cost you more. This makes life-only annuity payments more appealing for singles without children. It may not be the best choice for married couples. An annuity term that is life-only will pay a greater monthly income than a joint-life term.

Joint-Life Payments

Married couples often use these. Annuity payments that are joint-life and life-only are similar to those paid out jointly. The only difference is that the payments will continue for as long as either spouse remains alive. The joint-life annuity option will provide income for a spouse who has died. Although your monthly income will be lower than a life-only option, you can still receive income.

Many pension plans offer joint-life payments. This means that the spouse who survives can receive 50% or 75% instead of 100%. This option can be used if your spouse would require a portion of your pension income after your death. However, it is not necessary. You will get a slightly lower monthly income if you keep 100% of your pension benefit for a surviving spouse than if you keep 50%.

You must decide how your pension benefits will be paid out if you get married. Make sure you review all the options available to you as a pension survivor. This will allow you to become familiar with all the benefits and the pros.

Annuity payments with a term guarantee

These annuity payouts, also known as "period certain," are guaranteed for a fixed term. An annuity payout with a 10-year term is guaranteed for payments for at least 10 years. If you die within the first year of the payment, the payments will continue to your beneficiary for 10 years. After the first 10 years, all payments cease. In situations where there is no other source of income, term annuities may be a great way to generate income.

Let's suppose you decide to retire at 60. Your pension benefit will not begin until you turn 65. To provide income for five years, you might consider purchasing a five-year term certain annuity. This will provide income for those between the ages of 60 and 65. A certain term payout can be a great option for younger spouses, who are more likely to live longer. The term certain offers security to the older spouse if the younger spouse dies first.

Life with Certain Term Payments

This choice allows you to get money for the rest of your life or for a certain amount of time, whichever comes first. You might decide that your life will last for ten years. If you start getting payments now and live for another 20 years, you will continue to receive money for the rest of your life. If you passed away two years after you first began receiving payments, your beneficiary would continue to receive payments for eight years. This will bring your ten-year sentence to a close.

Conclusion

All of these payout options are possible. Your best option will depend on your financial resources, age, and dependents. Although the payout for the life-only option is the most lucrative, you might consider a lower payment to ensure that the payments will continue after your death.