When strategizing the combination of annuities, it’s important to understand the volatility of variable annuities, which are tied to market performance, much like indexed annuities. Once you start gearing the distribution to the underlying investments in stocks, it’s possible to lose the guaranteed income stream found with fixed annuity options.
There are a number of factors to be considered when calculating the payout of an immediate annuity, with a lump-sum purchase premium. Life expectancy of the holder, interest rate expected, underlying investment performance and payment frequency are a few factors. Taxes and inflation may affect fixed income recipients, but a desire for regular, lifelong income payments and the desire to start payments quickly, are the key motivators for purchasers of these investment and retirement-planning instruments.
The majority of purchasers may include those people with a structured legal settlement, such as a liability lawsuit, or those rolling over a 401K or company pension account. Retiring employees are able to diversify their retirement plans and pensions into more than one company and lost income can be replaced over many years, with guaranteed certainty. An Immediate Annuity can provide steady, guaranteed income, which can provide the money to pay for essential household expenses, for the rest of your life. The Immediate Annuity be a desirable option for those nearing retirement age. Much like the name implies, payments begin shortly after signing the contract, with the insurer. An individual pays a lump sum payment to purchase the annuities and then, regular payments start, almost immediately.
What is an Immediate Annuity
When compared to deferred annuities, the Immediate Annuity bypasses the accumulation phase, where regular purchase payments are made, until payout begins at a later date. During the distribution phase, invested earnings are paid out to the annuity holder, for the remainder of their life.
Because distributions start immediately, there is no waiting period for the regular distributions to be made, like in the case of a deferred annuity. While the first payment on an Immediate Annuity may be delayed for a year, it doesn’t require a longer waiting period to start receiving a payout of earnings, on the underlying investments.
Lifetime distribution is where the annuity holder receives level payments, throughout the remainder of their life. Ordinarily, once death of the annuity holder occurs, any unpaid distributions are retained by the insurance company, unlike the Variable Annuity that have survivor death benefits. Essentially, they allow a holder to defer taxes on a lump sum, while guaranteeing regular income payments to subsidize their retirement. Purchase payments are invested by the insurance company and earnings, besides paid-in funds, are disbursed in level payments.
Recently, there are combinations of annuities that allow an immediate annuity to be combined with variable annuities, so a death benefit is available to survivors. This may involve a lower-priced lifetime annuity, where the difference is used to purchase a life insurance policy or similar financial investment instrument. Understanding the different types of annuities is important, since purchase payments, distribution arrangements and survivor benefits can vary.
When strategizing the combination of annuities, it’s important to understand the volatility of variable annuities, which are tied to market performance, much like indexed annuities. Once you start gearing the distribution to the underlying investments in stocks, it’s possible to lose the guaranteed income stream found with fixed annuity options.
There are a number of factors to be considered when calculating the payout of an immediate annuity, with a lump-sum purchase premium. Life expectancy of the holder, interest rate expected, underlying investment performance and payment frequency are a few factors. Taxes and inflation may affect fixed income recipients, but a desire for regular, lifelong income payments and the desire to start payments quickly, are the key motivators for purchasers of these investment and retirement-planning instruments.
Financial planning with J.William King and associates
We help clients achieve their financial goals through personal planning and advice.
We listen to your dreams and goals, create a personalized financial plan, and track your progress over time.
Our Confident Retirement® approach
We make retirement planning more manageable by breaking it down into doable steps. Our exclusive approach helps ensure you cover essential expenses so that you’ll be able to do the things you’ve dreamed about in retirement. We help you prepare for the unexpected and encourage you to think about your legacy.
ANNUITIES:
Turn Challenges into Opportunities.
It's your investments' turn to do the hard work.
Whether you’re newly retired, getting ready to retire laying the foundation of your financial future, a good plan with the right strategies can help you meet the financial challenges you’ll face on the road to retirement. Our range of solutions can help give you the control and confidence you may need to enjoy Retirement Income certainty.
Lifetime® Income is the only benefit available that locks in new account highs daily and immediately starts growing your retirement income at an annual compounded rate for the first 10 years or until you take your first guaranteed retirement income withdrawals (called a Lifetime Withdrawal), whichever comes first.
That means more potential for higher annual income in retirement.
- Create guaranteed lifetime income for retirement
- Increase your retirement income in up markets, while protecting it through downturns
- Gain access to professionally managed investment portfolios
- Provide a guaranteed death benefit for your beneficiaries
Developing a retirement income strategy is typically an ongoing process that is aimed at providing income for today's needs as well as for long-term needs and goals. Together, we will discuss some aspects to consider when look at how annuities can be used in your client's income strategy.
