A Publication of WTVP

Some retirees may wonder if they’ll outlive their money—especially given the impact of market conditions on their retirement nest eggs during the past few years. Life offers few guarantees, but there’s one you may want to consider.

Income for Life

An immediate annuity may help address the challenge of having enough retirement income to last a lifetime. An annuity is a contract between you and an insurance company that you generally buy with a lump sum and from which you begin receiving income within a short period—always less than 13 months. There are various ways to receive income payments from an annuity contract, including guarantees for life. A life annuity is designed to provide income for the rest of the life of the annuitant—no matter how long he or she lives. The amount of payment depends on the account value and the life expectancy of the annuitant.

An “annuitant,” the person whose life governs the duration of the payments, may purchase an immediate annuity at age 65 and live for only a year or two, while another may live to 100. Those who die early may forfeit their money to those who live longer.

Minimum Guarantees

Some people don’t like taking the risk that they may forfeit a sizable portion of their nest egg. There are annuity income options that guarantee payments for a specific time period, usually from five to 30 years. If the annuitant dies before all payments have been made, then the owner—or beneficiary, if the owner is deceased—will receive the balance of the payments for the rest of the guarantee period.

Another type of annuity income option guarantees payments for the annuitant’s life, with a guaranteed number of years. If the annuitant dies during the guarantee period, payments will continue to the annuity’s owner or beneficiary for the remainder of the period. Many annuities also offer this option for the lives of two investors. For these annuities, after one annuitant dies, payments continue to the surviving annuitant. The payments paid after the first annuitant’s death may be the same or lower, depending on what was selected at the time of purchase.

A financial professional can help you determine whether immediate annuities make sense for your situation. IBI