If you want to take money out of an annuity, there are a number of options available to you. You can take out some or all the funds during the accumulation phase of the plan, which is the time when deposits are being made to your investment account. This phase may last for a number of years, since you can choose to make deposits to an annuity over a long time rather than putting a lump sum into the plan.
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An annuity can pay out for a guaranteed period or can be set up to provide an income for life. Another option is to set up a plan that provides a lifetime income along with a guaranteed time that the insurance company will make payments. The lifetime plan with a guaranteed time for payout is a plan that incorporates elements of the other two options.
Period Certain Annuity
Different types of annuities offer different payment options. With a period certain annuity you specify how long you wish to receive payments from the insurer. Payments can be set up for between 5-30 years. The amount you will receive depends on how much money you invested in the plan, as well as your life expectancy. If you die before the time you elect to receive payments expires, your beneficiary will receive the payments until the end of the term.
With a joint and survivor annuity, the payments would be made to your surviving spouse. You also have the option of designating anyone else you choose as your beneficiary.
Lifetime Payments Annuity
If you decide to choose a plan that offers lifetime payments, you need to be aware that the payments will cease on your death. There is no provision for a beneficiary to receive any benefit after the annuitant has passed away.
You can choose a fixed or variable annuity with this type of plan. A fixed annuity guarantees a minimum rate of return for policyholders. A variable annuity offers the potential to earn a higher rate of return, but the amount goes up and down with changes in the investment market.
The amount you receive as a payout depends on the amount you chose to invest, as well as your life expectancy. The insurance company’s underwriters calculate the level of risk and determine how much the payments are.
Income for Life with a Guaranteed Period Certain Benefit Annuity
This option is a combination of the period certain and lifetime payments annuity options. Under the plan, the insurance company agrees to make payments to the annuitant for life and the payments are guaranteed for a set amount of time.
If you set up a plan that guarantees that you receive payments for 10 years and you die at the five-year mark, the insurance company must continue to make the annuity payments to your beneficiary, if there is one, for the remaining five years. Be aware that with most annuities, there is no beneficiary and the money goes to the insurer.
Before making a decision about which type of annuity to buy, you need to consider all of these options carefully. There is no right choice that is a good fit for everyone. The need or desire for a lifetime income must be weighed against the higher payout that you may be able to receive if you chose an annuity that pays out for a specific period only.
You will also need to decide how often you would like to receive payments from your annuity. You can choose to be paid annually, semi-annually, quarterly or monthly. Before making your choice, you would need to consider your needs, other sources of income and which option would be the best one for cash-flow purposes.
Buy an annuity only from an insurance company that you have thoroughly researched. In the case of a deferred annuity, you are turning your money over to the company and trusting that you will receive the benefits as agreed later. Make sure that you have checked the company’s financial rating with Moody’s, Standard and Poor’s or A.M. Best before depositing any funds. You will want to make sure that it has a top rating before signing a contract to set up an annuity.
When it comes to taking money out of an annuity, you have several options available to you. You can choose to set up a plan where you receive payments for life, or only for a certain period. Married couples may want to consider setting up a joint annuity so that the surviving spouse continues to receive payments after the annuitant’s death.
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