Annuities: Lifelong Income like a pension

​While there are many reasons that a person would purchase an annuity, one major reason is to receive an income that will last as long as a person might live.

To meet the qualification of a lifelong income annuity, the period of time that the income is paid is for at least for the life of the annuitant.

Other income annuities might provide income for some specified period of time such as ten years, 20 years or even longer.

While the annuitant might in fact not live longer than the specific period of time, there is no continuation of income if he or she does, unless the annuity has a payout period that is lifelong.

So the basic difference can be stated simply: only a lifelong income annuity carries the specific promise to pay the annuitant a reliable, consistent income that lasts for at least as long as the annuitant lives, no matter how long that might be.

To understand why fixed annuities can be a great choice for building your own personal pension, it is important to know that in at least one important way they are similar to your Social Security retirement benefits and many employer-sponsored pensions.

​Compared with selecting and managing stocks, bonds, mutual funds or just about any other financial instrument that might be used to generate future retirement income, annuities have little in common with the typical do-it-yourself retirement plans.

​The responsibility for making sure that the annuity provides you with a reliable, consistent, lifelong income is shifted from you to the insurance company issuing your annuity.

With many annuities, at the time of purchase you will know the exact minimum amount of income that will be provided at any future date when you might decide to start receiving that income. In other words, many annuities will provide a schedule that shows that at a minimum you will receive a specific amount of income based on a specific start date.

​The relationship between start date and amount of income is in some ways similar to Social Security in that the longer you delay the start of the annuity’s income, the greater the amount of the subsequent lifelong income you will receive.

Instead of selecting and managing investments in the hope that they will provide lifelong income, with an annuity the insurance company issuing the annuity is promising you in advance the amount of lifelong income you will receive.

That promise is backed by the full claims-paying ability of that insurance company.

A joint life annuity protects a spouse by providing the continuation of a payout for the lifetime of both the annuitant and the surviving spouse. Lifetime income annuities with 10 years, 15 years or an even longer number of years of certain payments are another choice. These annuities provide for the continuation of the payout for a minimum certain number of years even if annuitant has died. But again, no matter how long the person lives, the income will continue.

Few things will be more important than your future retirement. And the way time flies, it will happen before you know it.  We can help you plan for the inevitable. ​