Income annuities provide cash flow, peace of mind, and can help people subsidize their pensions and social security payments. Most people choose to opt for monthly income while other like to receive quarterly or yearly payments.
In the United States, Do NOT choose an immediate annuity until you have reached the age of 59 1/2 or you will receive a penalty from the Internal Revenue Service.
Like anything else in life, there are a few exceptions to this rule and you should consult an annuity advisor prior to purchasing an immediate annuity.
You can choose a variety of income payments. They include:
• 1-20 year period certain- The carrier will pay you an income for a selected period of time. If you die before your payout period ends, your beneficiary will receive the balance.
An example would be a 10 year period certain, no life.
• Period Certain + Life- The carrier will pay you an income for a period of time and if you live past that time, you will still receive payments until you die. If you die before the selected period of time, your beneficiary will receive the balance. An example would be a 10 year period certain plus life.
• Life Only- You will receive a payment for the rest of your life. If you die early, the carrier keeps the balance. If you live to be 120 year old, then the company is on the hook for those payments. These tend to pay the highest payouts.
Is this for me?
If you are looking for a guarantee cash flow regardless of how many years you live, immediate annuities can supplement the cash flow from your portfolio. Many people are worried about outliving their money and an income annuity can provide a piece of mind in your golden years that will allow you to pay for living expenses along the way.