An annuity offers guaranteed income designed to meet daily challenges of retirement and long-range future goals. Guaranteed income annuity, or guaranteed future income annuity, covers your future basic living expenses on food, utilities, transportation, insurance premiums, and debt payments.
Guaranteed Future Income Annuity
Guaranteed income is provided by life insurance companies which guarantee annuity rates either for a specific period or for a lifetime in return for a capital sum. With a guarantee, no matter how long you live in the future, you will always have the security of knowing that you have future earnings, and payments will continue for as long as you live. The total payout you receive will be largely determined by your own longevity. The longer you live, the more earnings you will receive in the future. In the event of early death within the guaranteed period in the future, income is paid for the balance of the guaranteed rates to the beneficiaries.
Immediate Annuity Rates
Aside from guaranteed income, immediate annuity is also available. Immediate annuities are designed to provide income immediately in retirement. Immediate annuity has no accumulation period. Buyers pay and go straight to the distribution phase. Immediate annuity rates can be compared to monthly pension checks. You pay a lump sum in exchange for immediate income rates. The monthly payment rates start immediately, usually within 30 days of handing over your money. Immediate annuity is a way to convert at least a portion of your retirement funds into a steady income rates that last as long as you do.
When you buy an immediate annuity you have to determine how long your guarantee will last. A term certain annuity will have guarantee rates that last for a specific number of years, whereas a life annuity provides guarantee for as long as you are alive. The capital is non-returnable and hence the guarantee paid is relatively high.