Several Ways To Receive Income From Annuity

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Income Options with Guarantees

How would you like to receive your income? A number of choices are available for you:

Lifetime income means that you are guaranteed an income for life by your insurance company. After your death, payments will cease.

Lifetime income with a guaranteed period means that your insurance company will guarantee your income throughout your life. Upon your death before the expiration of the guaranteed period, your beneficiaries will receive payments until the guaranteed period ends.

Lifetime income for two guarantees an income for life. You and your spouse or other beneficiary will receive an income until the end of both of your lives. This is known as a joint and survivor option. Your insurance company issues the guarantee.

Many other payment options are available to you. Your insurance agent or financial advisor can put together a plan specific to your needs and situation. Since guarantees for life are dependent upon the financial stability of the issuing company, it is very important to research the insurance company you are considering ...
... thoroughly.

Before Signing on the Dotted Line, Ask Yourself Some Important Questions

Have you finished researching all of your options? Investing money is one of the most important decisions you will ever make. Choosing a company stable enough to outlast both you and your investment is vital.

Is the high interest rate on your fixed annuities just an introductory ploy to get you to sign up? Companies sometimes offer bonus rates as incentives to invest in their product. If you choose such an annuity, make sure that the underlying interest rate and the issuing insurance company are stable. This is especially true if you are exchanging annuities.

Check out your company's surrender terms. Are the fees high? How long is the surrender fee in place?

How have the funding options performed for your variable annuity? A good performance over a three to five year period indicates a more reliable funding option. Research the history of your option in financial newspapers or financial analytical publications, such as the Wall Street Journal or Lipper Analytical Services. These publications can be found in your local library. Be cautious about history because no funding option is guaranteed to perform at the top interest rate forever.

Does your variable annuity give you multiple funding options? If your current funding option drops, you may wish to change to a different option. Make sure that choice is available for your future investment needs.

Is it possible that the capital gains tax rate is lower than your future ordinary income tax rate? This could cause you to pay more taxes by choosing an annuity than another investment, which is taxed at the capital gains rate. You will need to weigh the tax deferment benefits of an annuity against any lower rate you may pay with another investment. Your tax consultant can help you sort out this issue.

What is the financial rating of the company issuing your annuity? The person who sells you an annuity must be licensed, but annuities are not issued by agents or brokers. Annuities are issued by insurance companies. What is the claims payment history of this company? Are they reliable? Any promise made in an annuity contract will only be valid if that company has the strength to pay its claims and survive over the years. Research your company and annuity in the financial periodicals at your local library. The department of insurance for your state should have relevant information as well. Choose an annuity sponsored by a company that receives a good grade in all categories.