An annuity can guarantee you lifetime income after you pay an initial premium. There are two main categories of annuities: fixed, fixed index, and variable. Both types of annuities can give you lifetime income, but different features and conditions apply depending on which annuity you choose.
A fixed annuity that provides regular income is called an immediate annuity or SPIA (Single Premium Immediate annuity).
An immediate fixed annuity will provide you a pre-determined (a fixed number of dollars) income per month. Fixed index annuities are similar in that they can provide a steady stream of income, but monthly payments are linked to a market index. If the index goes up, payments are bigger. If the index goes down, payments will be smaller (but not below a guaranteed minimum).
You can buy an annuity for one or two people, and with a “guaranteed period”:
With all fixed and fixed index immediate annuities, its very difficult to withdraw money from the annuity once the monthly payment start.
One mistake people sometimes make with these types of annuities, is under calculating the amount of money that they will need to live. An amount of monthly income now that may cover your expenses, may not be enough ten years from now with inflation.
In part two of this series we will discuss how to get lifetime income from a variable annuity.
This lesson is part of our Free Guide to Investing in Annuities. Continue to the next lesson here.
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