Life Income annuities have been around for a long time. The concept is straight forward. You hand over a lump sum of money to the insurance company and they show you how much they will pay as income for the rest of your life. There are a number of payout options such as a “Straight life payout” (They pay the money until you die), “Life pay with return of premium” (They pay for life and will pay any unused portion to a beneficiary if you die too soon) and a number of other options as well.
Life pay annuities are valuable when used in the right situation. They can provide guaranteed income and are not subject to market fluctuation. In other words, you can rely on the payout no matter what. Wikipedia has a very good article on life pay annuities that is worth reading (click her for Wikipedia article) The only real drawback to the life income annuity is that you are giving up control of the lump sum asset. Other lump sums should be maintained in the event it is needed.
In many cases, clients can obtain a better payout by using an indexed annuity with an income rider. This approach always works better when someone is willing to wait a few years before starting income. Using an income rider will allow you to know exactly how much income you can have at a future date such as 2, 5, 10 even 20 years down the road. We always use the company that has the highest payout at the time and currently Security Benefit is the one paying the most. They win in almost all payout scenarios. Click Here for Security Benefit Info This option also allows the client to maintain access to the lump sum investment which can have advantages over the traditional life annuity.
If a client is looking for immediate income, the traditional life annuity will often have the highest payout. Given that insurance companies are constantly competing with each other to have the highest payout, it is prudent to check the market to make sure you are getting the highest payout possible.
Call (203-796-5403) or email Edward@Croweandassociates.com if you have additional questions or would like to obtain information or quotes.