Settlement Options
One of the great benefits of annuities is the flexibility you have in choosing how
to receive distributions. These distribution options, or "settlement options," allow
you to decide how best to accomplish your goals. While you should check with the insurer
whose annuity product you are considering for the specific options they offer, these
are the basic options that are generally available.
Life Only
Payments are received for the lifetime of the annuitant. At the death of the annuitant,
payments cease. The insurance company keeps whatever balance remains, leaving nothing
to the owner's beneficiaries. While this option offers the highest reward in the
form of providing the highest payout, it is also presents the highest risk
(the potential loss if the owner dies prematurely.) This may be an appropriate
option for single persons and widow(er)s.
Joint and Last Survivor
An amount paid over not just a single measuring life, but over two lives. Married couples
often choose this option to provide care over the lifetimes of both spouses.
The amount received is not reduced upon the death of one of the spouses.
Lifetime with Period Certain
Similar to the "life only" option, only with slightly diminished risk. This option
guarantees that payments will be made for a set period of time, even if the annuitant
dies during that time period. For example, assume that you are the owner and annuitant
on an annuity, with your child named as beneficiary. If you elect a life with 10-year
period certain, and die after receiving 6 years of payments, your child would be
entitled to equivalent payments for another 4 years. Note that the period begins
running at the point when payments begin to be received.
Set Number of Years
Payouts shall be made for a specified number of years, regardless of the circumstances
surrounding the owner, annuitant, and/or beneficiary.
Specific Dollar Amount
This option allows money to be paid out for as long as there is money in the account.
This not a very common pay-out option.
Additionally, be sure to keep in mind that you always have the choice to take random
withdrawals if you so desire. Prior to making any withdrawal, however, you should
verify with the insurer that the withdrawal amount will not subject you to a surrender charge.
This Web site is intended for general information purposes only. It does not nor is it intended to constitute legal, tax or investment advice. United Financial Systems, Corporation is not a lawyer, registered investment advisor or investment advisor representative, and is not engaged in the practice of law or the business of investment advice.