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QUESTION:
An annuity can provide income for life
Confused about what an annuity is? Join the crowd. The most basic annuity is known as an immediate fixed lifetime annuity, and it works like this: You give an insurer a lump sum—often at retirement—in exchange for regular payments for as long as you live. (This is different than variable annuities, which give you payouts that depend on the stock market, or deferred annuities, savings vehicles that pay out long after you start putting money in.) An example: In exchange for a $500,000 lump-sum deposit into a SPIA (Single Premium Immediate Annuity), a 65-year-old man would collect about $3,000 a month for life. (Payment for women of the same age are be slightly lower, since they have longer life expectancies.) Annuities typically offer a large array of options, including inflation-adjusted payouts and varying survivor benefits. Some financial advisors have been wary of annuities because they can be complicated and hard to compare. Further, with an annuity you usually lock yourself into a fixed return, your money isn't liquid, and your heirs may receive nothing when you die. However, Annuities are unique in offering lifetime income which is similar to pensions (which are now disappearing) and Social Security. Some things to think about: - keep some money in a liquid retirement savings account in case you need a lump sum of money. - keep it simple - basic immediate fixed lifetime annuities are usually more cost effective. - look at the credit rating of the annuity provider - ideally rated AA– or better by Standard & Poor’s or Aa3 by Moody’s - get an unbiased source to run quotes so you can compare prices
	asked by SF Low Risk, 5/10/2006
Categories: Asset and Income Protection Insurance, Annuities, Estate Planning, Retirement Income, Financial Planning for Retirement, Retirement Assets, Annuity

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