We now understand our options when it comes to annuity investments, but what about ages from now when you are ready to withdraw? What about your annuity payout options?
What you are determining when you start concerning yourself with annuity payout options is how you want your payouts calculated when you eventually cash out.
There are really only four main types of annuity payout options. These will make sense as we talk about them in more depth.
They are the guaranteed period of payment, lifetime payments, life with period certain, and beneficiary payment.
Annuity Payout Options In-Depth
If you opt for the income with a guaranteed payment period, you are promising yourself a specific amount of payment for a set amount of time. That is why this is also called a period certain annuity at times. You can choose the payout period, such as ten years or thirty years, and of course this will alter your payment amounts. If you were to perish before the period of your payments was complete, then your beneficiary will be given the remainder of your money for the rest of the payment period.
The second annuity payout option is the lifetime payment. With this type of payment you are guaranteed a payment for the extent of your lifetime, but only that long. There will be no benefits passed on to a survivor. You can choose to have fixed or variable annuities with this option. The calculation for your payment is dependent upon your investment and your life expectancy. When you die, nobody gets the remainder, so hopefully you live longer than expected to reap the extra benefits.
If you choose the life with period certain payment, also known as the guaranteed period of payment, you are looking at a combination of life and period certain annuities. What you will be receiving is payment for the extent of your life, but within that time frame you will also have a period certain aspect to the account. The great thing about this type of payment option is that if you are to die within your guaranteed payment period, your beneficiary will continue to receive your money until this allotted time has passed.
The fourth and final of the main annuity payout options is the beneficiary payment, which is sometimes called joint or survivor annuity. Your beneficiary, whether that is a joint account member or a survivor on the account, will receive payouts for his or her lifetime after you perish. This is a good idea for married people as it guarantees a benefit for the partner in the event of any kind of mishap.
Summary of Payout Options in Annuities
Above is a description of each of the four types of annuity payout options. Again, those are the guaranteed period of payment, payments for your lifetime, the lifetime with period of payment certain, and the joint or survivor annuity. Each has its own benefits and weaknesses. It is for you to decide which is most appropriate for your investment and lifestyle.