Getting a consistent monthly income in retirement is a major concern for the seniors. Lots of people reaching retirement or have already retired are looking for different options to receive a guaranteed income to take care of their daily expenses and annuity insurance is the most debated option among all others. Learn more about all the confusion revolving around annuities and the best possible solution to receive a guaranteed income in retirement.
Is an annuity insurance really required?
First of all, it’s important to understand what annuities are designed for and how they serve the insured with their expenses after retirement. Under a retirement annuity plan, the insured needs to pay a premium till they retire and then receive a fixed monthly income throughout their retirement life. Some annuities also let the insured deposit a lump sum amount to the insured and receive a monthly income immediately. At times, insurance companies collect an accumulated cash amount from the insured with the promise that they will provide a consistent monthly income to take care of their essential expenses. But the insured doesn’t receive the amount they had expected as the returning amount depends on various factors including the amount invested, the current rate of interest, age and sex of the insured.
Moreover, an annuity isn’t the only investment people make to receive a decent amount in their retirement life. Social security is such an investment. Many people invest money in social security or other options at an early age and by the time they reach their retirement they already had invested too much. If the social security promises to provide a monthly income that would be sufficient to take care of daily expenses, the insured might not need an additional insurance for the same.
How to calculate the annuity payment?
To decide better whether an annuity insurance is suitable for a buyer, it’s crucial to get an idea how they will be receiving after depositing a particular amount. Insured can ask the representatives from different insurance provider about the same or use the annuity payment calculator online. If a 65-years old man invests $150,000 in an immediate annuity, he might receive $825 a month, a 65-years old woman investing the same amount will receive around $788 while a 65-years old couple would receive $705 as long as either one of them is alive. Similarly, a 65-years old man invests $100,000 under the deferred annuity insurance might receive $4000, a 65-years old woman investing the same amount will receive around $3200 while a 65-years old couple would receive $2200 till either one of them is living. Buyers looking for the annuity options at retirement can to use different annuity payment calculators available online for an immediate and deferred annuity.
One important query that may arise in mind of prospective buyers is that can’t they withdraw the same monthly amount by making an individual investment on their own? The answer is: not necessary. That’s because of the mortality credits given by the insurance companies. Some insured may die before than others and when this happens, it allows the insurance to provide to essentially transfer the payments to those who live longer. Mortality credits and investment gains are additional income credited to insured’ account, along with the return of the original principal.
Immediate or Deferred Annuity Insurance?
Immediate annuity plans offer a great choice to receive a consistent monthly income if the insured has an accumulated cash value by the time they retire. They can invest an appropriate amount in the annuities and start receiving a guaranteed income instantly. However, it’s not recommended to invest all the savings in just one insurance. Investing part of the savings in stocks or mutual bonds may also prove helpful and pay for some unpredicted expenses.
Most of the jobs don’t provide the luxury to receive a lump sum amount at the time of retirement. Hence, waiting for the retirement may not be a good idea and employees should plan their retirement life early and make investments accordingly. Deferred annuities are designed for those very employees. Under these plans, insured can choose to pay a fixed premium monthly, quarterly or half-yearly, as per their convenience and receive a guaranteed monthly income to take care of essential expenses in their retirement life. Also, buyers having a strong understanding of stock market may choose to invest in variable annuities and earn additional income depending on the performance in the market.
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