You have been smart about saving. You managed to work hard, make good investments, and accumulate a substantial sum of money. As you approach your 60th birthday, you start to think about ways to use that money to generate income when you retire. You want safety, but you cannot stomach the idea of earning a meager one or two percent in a certificate of deposit. Have you considered investing in a fixed index annuity or a hybrid annuity with a lifetime income annuity rider?
Income from Annuities
Annuities are in a category of their own. While you could generate a stream of income by purchasing bonds or certificates of deposit, only an annuity with a lifetime income rider can guarantee that you will receive income for the rest of your life. Income is generated from the amount of your initial investment plus the return, or rate of interest, you earn prior to when you elect to have the income faucet turned on.
If you buy a fixed index annuity with a lifetime income rider, you will be able to generate a greater amount of guaranteed monthly income by electing to wait for a longer period of time before you exercise the benefit.
What is a Lifetime Income Annuity rider?
A lifetime income annuity rider is an optional benefit that is attached to a deferred annuity. All income riders factor in the age when a person will begin to take periodic payments as well as the length of time from the purchase of the annuity until payments are to begin. A lifetime income annuity rider is not a free benefit, but it is a valuable benefit that the majority of people who purchase annuities elect to add. You pay an annual fee for the guarantee that you will receive a specific minimum amount of income, from a date certain, for the rest of your life. At Advanced Capital Management, Inc., we know how important it is for our clients to set up an annuity in such a way that it will meet their future income needs.
Benefits that a lifetime rider can provide
- It allows you to keep up with inflation with annual cost of living increases (COLA).
- You can access the guaranteed growth during the deferral period to provide income.
- It can continue to provide uninterrupted income for your surviving spouse.
- You can have payments wired directly into your bank account.
- You can choose how you want to receive payments such as monthly or quarterly.
What is an upfront bonus?
Upfront bonuses are incentives used by companies that sell annuities to entice you to select their product over a competitor’s product. The bonus is added to the amount you pay to purchase an annuity. If, for example, you purchase a $200,000 annuity and receive a 5 percent bonus, your starting amount would be $210,000.
One company might offer an 8 percent upfront bonus while another may only offer a 3 percent upfront bonus. Some annuities have no upfront bonus. Getting the highest income annuity bonus up front is not the most important factor in choosing an annuity. What matters the most is getting the highest income annuity rate.
Calculating the Payout Percentage
All annuity carriers base the percentage they use to determine how much you will receive each month or each year on your life expectancy from the time you start to receive payments. They must calculate how much money will be in your annuity and how many years they will have to pay it out. If you start taking payments at age 60, instead of age 70, your periodic payments will be lower.
Since determining the length of someone’s life is not an exact science, the payout factor can vary from one annuity carrier to another. When you are talking about a significant amount of money in an annuity, a difference in the payout percentage of just 1 percent can have a great impact on your guaranteed annual income.
We are Here to Help
Our knowledgeable and experienced representatives look forward to the opportunity to educate and inform you about all of the different annuity products offered through Advanced Capital Management.You can add additional riders that provide a death benefit or one that can increase your income, if, for example, you need additional money to pay for long-term care. Our reps can help you find the perfect plan from the hundreds of plans that are available. Please click on the orange “Get Annuity Quote” button to the right and get started on securing your future.