Annuity Certain
What Is an Annuity Certain?
An annuity certain is an investment that gives a series of payments to a set period to a person or the person's beneficiary or estate. It is an investment in retirement income offered by insurance companies. The annuity may likewise be taken as a lump sum. Since it has a set expiration date, an annuity certain generally pays a higher rate of return than a lifetime annuity. Run of the mill terms are 10, 15, or 20 years.
Understanding the Annuity Certain
The set expiration date separates the annuity certain from a life annuity. The last option gives payouts to the remainder of the annuitant's life and, at times, the life of the investor's spouse. A lower payment will be offered for a life annuity due to the uncertainty of the term. Equivalents for annuity certain incorporate years certain annuity, period certain annuity, fixed period annuity, and guaranteed term or guaranteed period annuity.
The investor in an annuity certain could undoubtedly outlast the payment period. Beware of depending on one for retirement income.
On account of the annuity certain, the buyer picks how long a period the annuity will payout. The payments will keep on being made until it lapses, either to the buyer or the buyer's beneficiary.
Is an Annuity Certain Right for You?
An annuity might be valuable as a short-term income supplement, yet it's anything but a long-term retirement strategy. That is, the individual who puts vigorously in an annuity certain could without much of a stretch outlast the payment period and be forced to live on a diminished income from there on.
The annuity certain option may be helpful to supplement retirement income for a limited period. For instance, to hold back to collect the full Social Security benefit at age 67, an annuity certain could fill the income gap while accommodating an enduring spouse in case of need. Not at all like numerous different investments, the total amount of the payment is guaranteed. That by itself makes it an appealing option for some.
Analysis of Annuities
An annuity certain accompanies similar negatives as different types of annuities. They can have high fees and upfront charges in comparison with other income options, like CDs. They might accompany a surrender fee that makes them expensive to early access.
A few annuities have incredibly complex and, surprisingly, exotic terms and conditions that the investor should peruse carefully. They frequently are sold by sales reps working on commission, and that emerges from your payment. At long last, net returns on an annuity are burdened as ordinary income.
Highlights
- An annuity certain may have high upfront costs and different fees similarly as with traditional annuities.
- It's anything but a decent long-term retirement strategy all alone however can be helpful at times as a short-term income supplement.
- A lifetime annuity yields a lower rate of return however payment is guaranteed for the life of the annuitant or the enduring spouse.
- An annuity certain gives a guaranteed retirement income to a pre-set period.
