Annuity contracts offer numerous options to receive your accumulated funds as retirement income. Most of these options can be for a specific time period and options can provide you with income for your lifetime or your beneficiary’s lifetime. By understanding how these income options work and what available income can be derived from your annuity will allow you to blend your retirement income.
One option rarely used is the interest only option. At any time you can withdraw the earned interest on a monthly basis. This allows for your account value to remain the same each month as you withdraw the monthly interest. As an example if your account value was $100,000 and the interest paid was 5%, you could withdraw a monthly interest check of $416 without invasion of principal. The value to this option is deferring any permanent decision until a later time period. The interest income option is cancellable at any time so total control is maintained.
Another option is the life income refund option. This allows for you to receive a monthly check for as long as you live and in the event of a premature death, the unused funds will be refunded to your beneficiary. However: if you live longer than life expectancy, the annuity will continue to pay, regardless of how long you live. The insurance company assumes full responsibility for your lifetime benefit.
A very popular income benefit is the joint and survivorship income benefit. This pays an income to both or a surviving spouse regardless of how long they live. This establishes income that neither party can outlive. In the event of the death of both parties, a rider can be selected so any remaining portion is refunded to a named beneficiary.
By using the contractual guarantees in an annuity many options for income exist. These options can be customized to accomplish almost anything in almost any situation.