Learn About Annuities For Lifetime Income

Annuities for Income

There are three basic types of income annuities:

Single Premium Immediate Annuity (SPIA) = this annuity is designed for a regular income stream, usually monthly, to begin within 30 days and no more than one year.  With a SPIA, all premium is given to the insurance company, but the payment amounts are higher when compared to annuity riders.  So, if you are looking for the biggest monthly paycheck and do not need to access the principle, a SPIA might be right for you. Furthermore, a SPIA is true “annuitization.”  This means that each payment made is tax optimized to include some principle, some interest return and something called an “exclusion ratio” which is a small portion of the annuity that is tax free.  This “annuitization” creates the most advantageous form of annuity payout when it comes to your tax footprint. Many people wrongly fear SPIAs because they believe that if they die too early, they won’t even get their original principle back.  It has been the industry standard to not write SPIAs that way now for some time, with most SPIAs having a guarantee that they will continue to pay your beneficiaries a period of certain payments if you die, or a lump sum equaling or greater than your principle if you die prematurely.

Deferred Income Annuities (DIA) = A DIA is very similar to a SPIA, but rather than paying out immediately, it guarantees lifetime payments, or payments for a period certain later down the road (many times 10+ years).  I recent tax law even declared that Qualified funds (funds accumulated in a 401k, 403b, 457, IRA, or similar pre-tax dollars) that are used to purchase a Deferred Income Annuity are not subject to the required minimum distributions at age 70.5.  These specific DIAs are called Qualified Longevity Annuity Contract.

Income Rider Annuity = Rather than losing liquidity access to your money in return for guaranteed income, many annuities (usually Indexed Annuities or Variable Annuities) have a separate account, sometimes called a “Lifetime Income Account” that calculates how much money can be paid out to the annuitant for the rest of their life and or spouses life and at what age.  So, just like a SPIA or DIA, these annuities provide lifetime guaranteed payments. However, unlike a SPIA or a DIA, the owner can access the principle if needed. Keep in mind, when the principle is accessed, it will normally lower the guaranteed payments. Also, if compared apples to apples, a SPIA or DIA will almost always have a higher monthly payout than an annuity with an income rider and the taxation is not as favorable because it is not considered true annuitization.  That being said, these annuities are rapidly growing in popularity because of their flexibility.


Lifetime Income

Only annuities can offer guaranteed lifetime income.  Find out more about the different options for lifetime income from annuities and see what best suits your needs.


Safe Growth

More and more, consumers are turning to annuities for guaranteed safe growth without any risk to their principal.  These products are evolving more and more each year to satisfy the safe growth need during times of market uncertainty.


Create A Legacy

Giving to our loved ones when we die is a top priority for many consumers. Whether it’s our spouses, or our family and beyond, there are annuities that are designed for just that purpose.


Long-Term Care

Annuities are not long term care insurance, but many Americans find themselves in a place where they can’t afford or qualify for long term care insurance. There are annuities designed to be alternatives to long term care insurance that can provide much needed funds to pay for end of life care.


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