Financial Planning

Annuity Payment Options: Income for Life, Joint Survivor, Annuity Cons

February 7, 2017 · 2 min read

Annuity payment options discussed. Income for life, Income for Life with Guaranteed Period and Joint and Survisor options. Review downsides and cons to an annuity. Three Main Options When You Receive an Annuity Payment &nbs…

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Annuity payment options discussed. Income for life, Income for Life with Guaranteed Period and Joint and Survisor options. Review downsides and cons to an annuity.
Three Main Options When You Receive an Annuity Payment

Downsides and Cons to an Annuity

Annuity payment options discussed. Income for life, Income for Life with Guaranteed Period and Joint and Survisor options. Review downsides and cons to an annuity.

Three Main Options When You Receive an Annuity Payment

Protect your assets from lawsuits, divorce, Medicaid.

There are three main options to choose from when receiving an annuity payment.

The first is Income for Life which guarantees you a set income for the duration of your life, but payments will cease upon your death. This option is risky since you don’t know exactly when you will die. Should you die before your annuity has been completely paid out, the insurance company, and not your beneficiaries, will receive the remainder of the annuity funds.
The second payout option is Income for Life with a Guaranteed Period. This option is more appealing because it provides the same coverage as the first option, but if you die before the predetermined guarantee period expires, your beneficiaries will continue to receive payments until the guarantee period ends.
A third option is known as the Joint and Survivor option. This option guarantees payment to you and another person, usually a spouse, until both of you dies. Annuity payout options are flexible and any of these options can be combined to fit your individual needs.

Downsides and Cons to an Annuity

Annuities may also be used to fund your 401(k), 403(b), and Individual Retirement (IRA), although it is not generally advised to use your annuity for this purpose. The two downsides of greatest concern of an annuity are a contribution limitation, and the federal government requirement for you to begin receiving minimum payments by age 70 1/2. Additionally, once you have used your annuity to finance your 401(k), for example, you will incur a ten percent penalty for early withdrawal if you take money before you reach age 59 1/2 and there are few exceptions to paying this penalty. Once you begin receiving annuity payments you cannot change your mind, and you will continue to receive payments for the predetermined time frame established during the accumulation phase.

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