A life annuity is an insurance product which provides income for life. You can not outlive the income. You provide a one time lump sum purchase to buy the income and the income will depend on the amount of capital spent, your age and terms for the income.
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Life Annuity Insurance Frequently Asked Questions
An annuity is a contract between the insurance company and the investor. The insurance company agrees to provide a monthly / annual income for the life of the investor.
The insurers quote on the income based on the amount used to purchase the annuity, your sex, age and interest rates in affect at time of purchase are factors that affect the income level. A good broker can generally quote the market rates for the best offer.
A annuity is generally used as part of the retirement income spectrum. It could also be used as part of structured settlement and or charitable donation.
Yes this is one of the most popular reasons to buy an life annuity. A Guaranteed income for life was typically one of the objectives of the pension plan and the life annuity will accomplish this objective.
Maybe and you should get a quote as this decision is not one you can generally unwind so making the right decision is important and one you will need to live with. The pension plan is doing the same thing as the annuity provider and will have to account for the promise or outsource it to the insurer.
All investments can have disadvantage and annuities are no different. The disadvantages can be, a lack of flexibility afterwards, interest rate risk if rates rise after purchase. Opportunity cost with the capital in the future and an zero estate value on death after the guaranteed payment periods end.
Guaranteed income for life, no future investment risk, no need to monitor investment performance, no risk of outliving your income, protection through the insurers insurer Assuris. A potentially higher income as the insurer gives an mortality bump to the income when it factors in the mortality gains on its block of business.
Everyone has their own reasons but someone with life shortening medical conditions might rule out this purchase. A hands on investor might not like the lost opportunity to use the capital. Concern for estate value is a primary objective. Periods of high inflation will erode the income value on inflation adjusted comparision.
Likely very easy as this option is one of the core choices you have for these type of funds.