One of the major benefits of an annuity is the flexibility of distribution choices available to the annuitant, including payments for the rest of your life, no matter how long that may be. This can be a very comforting feature, since outliving one’s retirement assets might be considered one of the worst possible things that could happen in your latter years.
The most common methods to receive cash payments from an annuity are the annuitization method, systematic withdrawals, or lump sum payment. When the annuity owner has reached age 59 1/2 they can begin to withdrawal funds from the annuity without tax penalties.
Annuitization Methods
- Life Annuity. Guarantees income for as long as the annuitant is alive. At the death of the annuitant, payments stop and the annuity contract terminates.
- Life Annuity with Period Certain. Guarantees income for as long as the annuitant is alive. If the annuitant dies before the end of a selected period of time, payments will continue to the beneficiary for the balance of the Period Certain.
- Joint and Survivor Life Annuity. Guarantees payments as long as one of the annuitants is still alive. Upon the death of one of the joint annuitants, payments will continue to the survivor annuitant as long as he/she continues to live. All payments stop and the contract terminates upon the death of the surviving annuitant.
- Joint and Survivor Life Annuity with Period Certain. Guarantees payments for the rest of both annuitants’ lives. Upon the death of one of the joint annuitants, payments continue to the survivor annuitant for as long as he/she lives. If both annuitants die during the Period Certain, payments continue to the beneficiary for the balance of the Period Certain.
- Period Certain. Pays income for a predetermined period of time. If the annuitant passes away before the term is over payments will continue to the beneficiary for the balance of the period certain.
- Lump Sum. Allows the annuity owner to cash out the annuity and take the account value. Ordinary taxes will be due on the entire investment gain of the annuity.
Systematic Withdrawals
Under this method the annuity owner can select the specific payment they wish to receive each month and how many payments they would like to receive. The insurance company does not guarantee that you will not outlive your income payments. How much you receive and how many months you receive payments depends on how much you have in the account.
Electing Not to Take Annuity Payments
Individuals who have no need for income from their annuity are not required to take distributions. At the death of the annuity owner the annuity will be transferred to the designated beneficiary.
To receive a free comparison of the best annuity products, contact a professional annuity advisor and secure your retirement today. Start Now!
Related Pages
