Who Needs a Lifetime Income Annuity?

For many individuals nearing retirement, the idea of budgeting can be a daunting task. After all, without a steady job and paycheck, how can they be sure that they are saving enough money to live comfortably during the decades after retirement? This troublesome question is often answered with the simple investment choice of a lifetime income annuity. The lifetime income annuity offers an easy way for retirees to ensure that they receive a guaranteed monthly stipend of cash that they can use to live long after they have retired from their job.

Studies have shown that if you take more than 4% of your retirement cash each year, you will run out of money after 30 years. If you have $100,000 in retirement, then, you would have less than $4,000 to live off of each year. For this reason, many investors look for the option of an income annuity. An income annuity can offer you money throughout the rest of your life – no matter how many years you might live.

An income annuity is a great investment choice for any retiree who wants to find a way to supplement their income during the Golden Years. However, there is a catch. Once you give the insurance company your money, you cannot get it back. Therefore, once you die, your annuity payments will end – leaving your spouse or heirs without the investment unless you include them in your annuity agreement. Therefore, if you live well past your life expectancy, you will continue to receive checks and live comfortably. However, if you invest in an income annuity and pass away soon thereafter, the insurance company will be able to keep all of the investment unless you have specified that an heir or spouse should continue to receive the payments (at a higher premium, of course).

In other words, an income annuity allows you to bet against the house. With this investment, the investor attempts to live longer than expected in order to receive a great return on the annuity. If you live well past your life expectancy, the insurance company must give you the monthly stipend, allowing you to see greater gains on your investment. Since you cannot get your investment back once you die, many retirement investors will choose an income annuity as a portion of their retirement savings plan, but not sink their entire savings into this option. In this way, they can enjoy the monthly payments without worrying that they will have nothing to leave their family members should they pass away before the average life expectancy dictates it.

For more information from Steven on how to invest in annuities, their pros & cons, and common investment mistakes, visit Free Annuity Rates.com.