Making Sense Of Your Annuity For Retirement
Making Sense of Annuities
Most of the time when a beneficiary receives a lump sum payment it is in the form of an annuity. This happens a lot when a beneficiary receives a large insurance payment that they want paid over a guaranteed period of time.
An annuity is a mathematical concept that is quite simple. Most of the times it starts with a lump sum of money paid out in equal installments over a period of time. The person receiving the payments is called the annuitant.
The amount of an annuity payment depends on three factors: starting principal, interest and income period (how long you want to receive income). While there maybe other financial institutes that can set up annuities only insurance companies can guarantee income for the life of the annuitant.
Annuities look like life insurance contracts but they are not, they are just the opposite. An annuity principal function is to liquidate an estate by issuing periodic payments out of the contract. While life insurance is concerned with how soon one dies an annuity main concern is dealing with how long will one live.
The value and importance of an annuity should be easy for anyone to see who is concerned with retirement planning. Who does not want guaranteed payments from an annuity that will paid out over ones life. This type of security brings peace of mind to countless of people in retirement. Annuities can play an important role in any situation when a person seeks to have a stream of income for a few years or for a life time.
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