What Are Fixed Retirement Annuities?
I wouegin, I need you to understand that I am talking about single premium immediate annuities (SPIA). These are also considered "fixed" annuities, as opposed to variable ones.
The reason I discuss the fixed products is because they are sold by insurance companies and agents, and they also provide a guaranteed rate of return. Another type of product, considered "variable", has more risk and is sold by stock brokers. There may be some advantages to these products too, but it is beyond the scope of this discussion and my own experience.
SPIA Explained
A single premium immediate annuity is pretty simple to understand. The owner has some cash, and he or she would like to turn that cash into a guaranteed income. He or she sets up a contract with a life insurance company that provides this product. In return for a lump sum payment, the owner can expect periodic payments which should start right away.
Any cash in the account will also grow according to the rate of return which is specified in the contract. Sometimes this rate is one set number, like an interest rate. Sometimes it is attached to a market index, but there is a guaranteed minimum. These are all things you will want to compare if you go shopping for a retirement annuity plan for yourself.
When people are planning for retirement, they want to know how much income they can enjoy after they make their contribution. They also want to know how much money they will need and how long they can expect to enjoy their extra income. These are all very good questions, but of course the answer will vary quite a bit.
I wouegin, I need you to understand that I am talking about single premium immediate annuities (SPIA). These are also considered "fixed" annuities, as opposed to variable ones.The reason I discuss the fixed products is because they are sold by insurance companies and agents, and they also provide a guaranteed rate of return. Another type of product, considered "variable", has more risk and is sold by stock brokers. There may be some advantages to these products too, but it is beyond the scope of this discussion and my own experience.
SPIA Explained
A single premium immediate annuity is pretty simple to understand. The owner has some cash, and he or she would like to turn that cash into a guaranteed income. He or she sets up a contract with a life insurance company that provides this product. In return for a lump sum payment, the owner can expect periodic payments which should start right away.
Any cash in the account will also grow according to the rate of return which is specified in the contract. Sometimes this rate is one set number, like an interest rate. Sometimes it is attached to a market index, but there is a guaranteed minimum. These are all things you will want to compare if you go shopping for a retirement annuity plan for yourself.
When people are planning for retirement, they want to know how much income they can enjoy after they make their contribution. They also want to know how much money they will need and how long they can expect to enjoy their extra income. These are all very good questions, but of course the answer will vary quite a bit.
- Some companies will require a guaranteed minimum deposit in order to start the contract. In the case of immediate returns, the minimum deposit amount is not usually an issue. The amount of money that an owner needs in order to get decent periods for a certain period of time will be an issue. An insurance company or agent should be able to run some illustrations that will help you figure this out.
- Your payment term may be a period of years. It may also be for "lifetime" payments. Lifetime payments are usually estimated by consulting life expectancy tables. That is why annuities are similar to life insurance. If you set up lifetime payments, and are expected to live another 30 years, you can still get payments if you live another 50 years.
- Of course the amount of your payment will also depend upon your initial contribution, the rate of return, and your term of payments. In general, you will get larger payments if you decide to take a shorter term.
See Examples Of SPIA Earnings For Retirement
If you would like annuities explained, it may help to see some examples. Here is a SPIA calculator that might help!
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http://EzineArticles.com/?expert=Marilyn_KatzIf you would like annuities explained, it may help to see some examples. Here is a SPIA calculator that might help!
