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Annuities: How to factor age and inheritance

As you prepare for retirement, you might wonder how best to incorporate more stability, security, and protection into your portfolio 鈥� while still finding opportunities to benefit from market growth. Many people leverage the security and protection of an annuity. Similar to a pension plan or Social Security benefits, an annuity can provide guaranteed income for those in or near retirement. Like a life insurance policy, it can even offer your loved ones future income in the form of a death benefit.

Before deciding which annuity is right for you, it鈥檚 important to understand how factors like your age and life expectancy, income needs, and estate planning goals can play into the decision-making process. 

How does age impact annuity payment rates?

Annuity payment rates 鈥� the amount you receive in payments from an annuity 鈥� are based on your age, life expectancy, interest rates, annuity terms, and other factors. Generally speaking, this means an older person鈥檚 rates will be a higher dollar amount than a younger person鈥檚, if the payment is based on life expectancy. A 70-year-old, for example, would likely receive higher payouts from an immediate annuity than someone younger, because their life expectancy is shorter. Gender can also play a role since women are statistically more likely to outlive men. At 麻豆传媒, gender is factored in on Single Premium Immediate Annuities (SPIAs) with a life-contingent payout, but not on period-certain-only or deferred-annuity income riders.

What is the best age to buy an annuity?

Everyone鈥檚 financial needs are different, but annuities are generally designed to provide steady income to those in or near retirement. In some cases, age restrictions may apply for certain products, carriers, or states.

What is the 鈥渁ge 75 rule鈥� for annuities?

The 鈥渁ge 75 rule鈥� refers to a common misconception that retirees must wait until age 75 to purchase an annuity. While it鈥檚 true that those with a shorter life expectancy will likely receive larger payouts, you do not have to wait until age 75 to buy an annuity.

There is no 鈥渞ight age鈥� to purchase an annuity. It鈥檚 important to review your options and compare your other retirement income sources to your anticipated expenses, then pursue the course of action that makes the most sense for your unique financial situation.

How is an annuity passed down to a beneficiary after the death of the owner?

Some annuities include a death benefit. The benefit depends on the type of annuity. For income annuities like SPIAs, the death benefit, if any, is determined by the payment option you selected. With others, your beneficiary typically receives an amount based on the annuity鈥檚 value at the time of death, as determined by the contract.

Check with your financial professional about death benefits if that鈥檚 a priority for you and your family.

What if an annuity has a death benefit but no designated beneficiary?

It鈥檚 important to ensure your annuity has a designated beneficiary. If your annuity has a death benefit option but no beneficiary is listed, it can be subject to probate 鈥� similar to what can happen if you die without a will. If there is no beneficiary, probate court will decide who receives the inherited annuity and subsequent death benefit.

What if the annuitant dies during the accumulation period before the annuity start date?

Immediate annuities do not include an accumulation period, since the payouts begin within one year of an annuity contract starting.

For deferred annuities, however, your beneficiary may be entitled to a death benefit 鈥攖ypically the accumulated value of the annuity contract 鈥� if the annuitant passes away during the accumulation period. 

Achieve more with 麻豆传媒 

While annuities have been around for centuries, today鈥檚 consumers have more options than ever for finding the product type and payout terms that work best for meeting their retirement needs. 

As you decide when it鈥檚 the right time to purchase an annuity, keep in mind that your income payments will be based on a number of factors. With a mission to help you retire remarkably, 麻豆传媒 provides retirement savings solutions and deep expertise in retirement planning and benefits management. To learn more about which product is right for you, visit 麻豆传媒鈥檚 website for more information.

Want the most from your retirement? Get smarter with Smart Strategies from 麻豆传媒. Your source for tips, tools and financial solutions that can help you live your best life.