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The Annuitant and Beneficiary

So we have talked long and hard about the types of annuities and the characteristics held by each one.  But what we haven’t talked about is the annuitant and beneficiary.  Who are these people and what role do they play in our consideration of annuities?

Simply put, the annuitant is the person that the annuity is dependent upon, most specifically their lifespan.  Everything is calculated from their birthdate.  The beneficiary on the other hand is the person who will receive the leftover money in the event that the annuitant dies before fully cashing out.

Let’s look deeper into both to understand the deeply woven effect both have on our annuities.

The Annuitant

This is the person everything is based off of.  They are the annuity holder and it is their birthdate that determines everything.  The contract of the annuity is tied to the age of the annuitant.  There is a whole ton of information available featuring statistics for people being born in every year and how this affects their life expectancy.  Using all of this information, the insurance company can determine how much money they are willing to insure the annuitant for.

If the annuitant is still of a young age, relative to most annuitants, then he or she will likely be given payments of a lesser value.  This is not necessarily a negative.  This is so that the payments can stretch on across a longer period of time without draining the nest egg too much too soon.  It limits risk.  Another factor is that of gender.  Women, in general, will live longer than males, which again will effect payments.

The Beneficiary

the annuitant and beneficiaryThe beneficiary will obtain the nest egg if the annuitant dies at any point.  The annuitant will name a beneficiary upon purchase of the annuity.  They will either be a primary or contingent beneficiary.

The main reason to assign a beneficiary is to eliminate the impending argument between greedy family members as to who will receive the money or who will get what percentage of it.  Some will even push to say “Well, you know dad would have wanted me to have most of it.”  Just avoid that altogether and assign a beneficiary.

The primary beneficiary will be the first person to receive the annuity payments if the annuitant dies.  There can be more than one as well.  Contingent beneficiaries will only receive the money if the primary beneficiaries are no longer living.  It is useful to make sure you name a list of beneficiaries in order of importance, because you never know what will happen in life.

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