Life annuity presentation and how to purchased life annuity, more tips on buying life insurance, buy an immediate life annuity when you retire, purchased life annuity in uk.

About Life Annuity

To purchase a life annuity, you make a one-time payment and distributions typically begin within 30 days, but can be delayed for up to one year. A life annuity can be fixed or variable, just as with deferred annuities. The income payments you receive from a "fixed" life annuity will never change and are based on the amount you contribute and the interest rate environment at the time of purchase.

A life annuity can provide dependable security: a stream of income payments that will continue for the rest of your life or for a period you select. If you are about to stop working, a life annuity may be a good place to invest a large lump sum of money accumulated through a deferred annuity, a retirement plan or other savings vehicle.

A life annuity can be purchased with funds from a variety of possible sources, such as: a maturing Certificate of Deposit (CD); monies which have accumulated in a Deferred Annuity account; or funds from a tax-qualified defined benefit, 401k or IRA account.

A Single Premium Life Annuity is flexible and suitable for a variety of income needs. A life annuity is most typically used to fund income requirements while in retirement. However, they can also be used to provide a source of income to dependents after your death, to provide specified child support or alimony payments, to fund specialized education for a disabled child or to consolidate assets and turn them into an income stream. Under current tax law, a portion of each payment received from a non-qualified life annuity is tax- free until your total premium is recovered. The remainder of each payment will be taxable as ordinary income in the year received. Talk to an Annuity Advantage Representative today and see how a Single Premium Life Annuity can help you meet your retirement income needs.

For more information about life annuity and more annuity insurance companices life annuity quotes, please visit Annuity Advantage.com.

purchased life annuity

Anyone that is typically aged 55 or over, has a large lump sum and want a guaranteed income for the rest of their life can benefit from purchased life annuities. Most providers set a minimum lump sum of £20,000 (or even higher) so often an individual will only be in this position when they retire and commute part of their pension fund to a tax free lump sum. They may also have been the beneficiaries of a will and have inherited a property that is later sold, and now they want to supplement their income.

The purchased life annuity market is not as developed as the compulsory purchase annuity (pension annuity) market so the income from the same size of lump sum is less, usually between 80% and 90% of the pension income. Also the insurance companies believe that because there is no compulsion to buy a purchased life annuity, as there is with a pension annuity, they are going to be selected against. In other words, only healthy people would buy a purchased life annuity and therefore this will reduce the mortality profit in this market and therefore reduces the rates offered.

Despite this lower income, the annuity taxation of a purchased life annuity is very favourable compared to pension annuities and it provides a higher income net of tax. This means that the majority of individuals on retirement that want to maximise their pension income should commute the maximum tax free lump sum and use this for a purchased life annuity.

A purchased life annuity can have many of the added features of pension annuities such as a guaranteed period, being paid in advance or arrears, with proportion, single or joint life annuity or level or escalating.

Usually if the purchased life annuity is escalating, this is not offered for RPI escalation but on a fixed rate escalation basis only, typically at 3%, 5% up to a maximum of 8% escalation. The annuity can have a dependents income that operates on the same basis as a survivors pension, this being an income paid to a spouse at 50%, 66% or 100% of the annuitants income. For more information about life annuity and purchased life annuity, please visit Sharing Pensions.

Tips on Buying Life Insurance

Here are tips for consumers who are in the market for life insurance or an annuity:

Know what you need: The classic and best reason for an individual to buy life insurance is for protection against dying too soon. The person buying life insurance should be primarily concerned with seeing that his or her survivors do not face a financial handicap. There may be other reasons that apply: Life insurance is also purchased to pay estate taxes. Business relationships often require life insurance or can benefit from it, for example. Annuities offer a secure way for consumers to make sure they don't outlive their money. Beware of anyone who tries to sell you life insurance as an "investment." Life insurance should be purchased for the protection it will give you.

Term life insurance: Most consumer advocates feel that term insurance is the best life insurance buy. Term is different from "whole life" or "ordinary life" in that you build up no equity, or cash value. In term, you pay each year for the cost of insurance, which typically increases annually as your chances of being alive the next year decline. Most term policies are renewable on an annual basis, and some have level premiums or a decreasing death benefit for a stated period -- one, five or ten years, or even to a specified age.

Whole life insurance: Whole, or "ordinary," life insurance is usually sold with a level premium. In the early years of the policy, the annual premium will be higher than comparable term insurance. (But because its premiums are level, whole life's annual premiums may eventually be less than term.) Whole life policies build up a cash value that consumers can withdraw or borrow against. There are many variations of whole life. Premiums may be payable for a specified number of years on a limited-payment basis. Consumers also may have the option of a single premium — paying all of the premiums at once with a single lump sum.

Know the company you are buying from: You can check the financial stability of any life insurance company through several reputable national rating companies. Some ratings are available at public libraries. The Commissioner's staff can verify that a company is authorized to do business in Washington state, and you can also check here to see what kind of complaints have been filed by other consumers against a company. Information on ratings, complaints and licensing is available from Commissioner Kreidler's toll-free Hot Line at 1-800-562-6900.

Accelerated benefits: Under rules adopted by Insurance Commissioner in 1994, authorized Washington life insurers can issue policies that include the possibility of accelerated benefits. Under these rules, a consumer suffering from a terminal illness can opt to receive discounted benefits prior to death.

Shop around for rates: Life insurance is a competitive marketplace, and much of the competition focuses on price. Don't hesitate to seek premium quotes from several different companies.

Shop for your own needs: If term insurance fits, that's what you should shop for. If you want to lower your premium at all costs, you may want to consider using a direct writer — a company that cuts costs by operating without agents. Consider your own convenience, however: Do you want personal contact with an agent? Or if you buy an life annuity, how fast can you get to your money in case of an emergency? If you are buying whole life, how fast does your money accumulate? What will the cash value be in one year? Three years? Ten years?

Update your coverage as your circumstances change: Don't be misled by someone who tells you you should buy additional policies for children as they are born. Children rarely have an income and seldom require life insurance. But your situation may change dramatically from year to year. Review your net worth every few years and reconsider the prospects your survivors may face if you die.

Don't let yourself get fast-talked into changes: Some life insurance policyholders in recent years have fallen victim to a practice called "twisting" or "churning." Churning occurs when your coverage is changed only to benefit the seller even though you may suffer a loss in the process. Churning often happens when people with cash-value policies are persuaded to convert their coverage to another policy, often one with a promise of better benefits. The problem is that the cash value of the original policy is raided in order to pay for the new policy. Luckless consumers may not realize until years later that the "higher" benefit policy is actually worth only a fraction of the value of the original policy.

Never buy a policy you don't understand: If you are given illustrations or booklets, save that material with your policy. If your agent or company cannot explain the policy terms to your satisfaction, shop elsewhere. Make sure you understand the guarantees in your policy (not just the agent's promises of returns) and the surrender penalties if you choose to drop the policy at any time. These costs are often hidden in a life insurance or annuity policy.

For more information about life insurance and life annuity resources and tips, please visit Offfice of the Insurance Commissioner.

buy an immediate life annuity when you retire

The release of William F. Sharpe's Financial Engines Retirement Planner prompted some interesting questions on buying an annuity when you retire. The Financial Engines software estimates your retirement income with the assumption that you liquidate your portfolio and buy an immediate life annuity on the day you retire. (Note: To Financial Engines' credit, they say they are not recommending that you buy an life annuity. They are merely using an immediate life annuity as a mechanism to forecast retirement income.)The purchase of an annuity forecloses a retiree's participation in the stock market and will likely reduce his returns in the long run.

You can find quotes on both immediate life annuities and period certain annuites (as well as several permutations in between) at the AnnuityShopper web site. Competitive quotes for immediate life annuities and period certain annulites are shown in the tables below. Table One also includes data from the IRS Life Expectancy Tables for comparison.

What about inflation?

While an immediate life annuity ensures you will never outlive your nestegg, it doesn't protect you against the ravages of inflation. So the generous annual benefit that some people find so attractive must be adjusted for future inflation. One way to do this is to hold back part of the annual annuity benefit payment and place it in a sinking fund. The sinking fund is then invested in the hope that it will grow and supplement the annual annuity benefit in the later years. Someone drawing $50,000/year today would need $132,000/year in 20 years if inflation averaged 5% per year.

For example, let's say a 65-year-old male buys an life annuity. Table One shows a 8.964% annual benefit and the IRS Life expectancy table says our 65 year old should live on average another 20 years. To give our annuity buyer every benefit of the doubt, let's say he lives for 40 years, to age 105. Surely if you live to 105 an annuity is a good deal.

To adjust for inflation we need to make two assumptions, what's the inflation rate, and what kind of return do we expect on our sinking fund. If we decide to be "95% safe," the inflation rate for a 40 year pay out period is 4.46%. That means for 5% of the 40 year pay out periods examined, inflation was higher than 4.46%. Similarly, the "95% safe" investment return on the S&P500 for a 40 year pay out period was 6.1%. Again, that means that in 5% of the 40 year pay out periods examined, the S&P500 index returned an average of less than 6.1%. So we are being conservative in making these assumptions.

Using the Annuity Shaft Detector spreadsheet, the 8.964% annual annuity benefit was reduced to an inflation-adjusted 4.71% the first year. The "95% safe" withdrawal rate from a portfolio of stocks and fixed income securities invested at the "efficient frontier for a 40 year pay out period is 4.44%. So an annuity only increases your withdrawal by 0.27%, while eliminating the substantial upside of remaining invested in equities. One look at terminal portfolio values that accompany safe withdrawal rates (see Table 4., below) should dissuade you from shortchanging your hiers or a bequest to a charity with the purchase of an immediate life annuity. There's a 50/50 chance your hiers would get at least $5 million and a 90% chance they'll inherit at least $1 million. Of course, with an immediate life annuity, your hiers get nothing. For more information about life annuity please visit Retire Early Home Page.

purchased life annuity in UK

Anyone that is typically aged 55 or over, has a large lump sum and want a guaranteed income for the rest of their life can benefit from purchased life annuities. Most providers set a minimum lump sum of £20,000 (or even higher) so often an individual will only be in this position when they retire and commute part of their pension fund to a tax free lump sum. They may also have been the beneficiaries of a will and have inherited a property that is later sold, and now they want to supplement their income.

The purchased life annuity market is not as developed as the compulsory purchase annuity (pension annuity) market so the income from the same size of lump sum is less, usually between 80% and 90% of the pension income. Also the insurance companies believe that because there is no compulsion to buy a purchased life annuity, as there is with a pension annuity, they are going to be selected against. In other words, only healthy people would buy a purchased life annuity and therefore this will reduce the mortality profit in this market and therefore reduces the rates offered.

Despite this lower income, the annuity taxation of a purchased life annuity is very favourable compared to pension annuities and it provides a higher income net of tax. This means that the majority of individuals on retirement that want to maximise their pension income should commute the maximum tax free lump sum and use this for a purchased life annuity.

purchased life annuity can have many of the added features of pension annuities such as a guaranteed period, being paid in advance or arrears, with proportion, single or joint life annuity or level or escalating.

Usually if the purchased life annuity is escalating, this is not offered for RPI escalation but on a fixed rate escalation basis only, typically at 3%, 5% up to a maximum of 8% escalation. The annuity can have a dependents income that operates on the same basis as a survivors pension, this being an income paid to a spouse at 50%, 66% or 100% of the annuitants income.

This feature is unique to a purchased life annuity. Capital protection can be selected rather than a guaranteed period. A guaranteed period would continue to make payments up to 5 or 10 years after the annuity was purchased even it the annuitant dies.

Capital protection ensures that if the annuitant dies earlier than expected, the difference between the gross income received and the original capital to purchase the annuity will be paid as a lump sum to the annuitant's estate.

To provide income after the death of the annuitant, he or she can therefore choose between a dependents income, capital protection or a guaranteed period, all with different levels of protection and associated costs. To learn more information about life annuity please visit Sharing Pensions.