Make sure you're getting the most out of your annuity income and not falling into the common traps of the industry, with these few simple things to focus on.
It depends on how you want it structured. In any case, I'm going to need a date of birth or dates of birth, when you want the income to start, and what state you live in because immediate annuities are regulated at the state level. Even though an annuity can represent every single carrier, it might not be approved in your state. Then you decide when you want the income to start. It's completely customizable. Just remember, by using our proprietary annuity calculators, we can shop all carriers and find the highest contractual guarantee for your specific situation.
Annuity income is priced primarily on your life expectancy when you make the payments, while interest rates play a secondary role. An annuity income is priced on your life expectancy at the time you make the payments. The older you are, the higher the payments; the younger you are, the lower the payments. If you structure it communal life with a spouse or partner and your spouse is significantly younger than you, then the annuity company is going to look primarily at that younger of the two.
The fact is, annuity companies have significant buildings because they know when you're going to die, and they price things accordingly because of the risk they are taking. If you're going to time interest rates to try and beat them, then you have to factor in the payments of the annuity payments that you missed because you didn't buy it.
The way that you should buy an annuity contract is by looking at the guarantees. If that contractual guarantee meets your goals, then you should consider implementing that transfer risk strategy.
In my opinion, it's an income because when you buy an annuity for future income, you're transferring the risk to that annuity company to provide an income stream for your entire life. For example, you don't look at Social Security as an asset, I'm assuming. You look at it as an income stream.
Annuity payments are based on your life expectancy at the time of the payment, but the combination of return of principal plus interest is what constitutes your lifetime income stream. Do not let an agent tell you that they have an annuity that the growth will offset the income. You're going to draw down on that asset, it's going to decrease, and you're going to subtract from that asset every time you have an income stream payment. The goal is to draw down the annuity to zero. Up until that point, it's a tear in your pockets; a combination return of principal plus interest. Additionally, I don't know what that return on investment will be because you cannot look at it as your typical investment asset. You have to view it as an income stream, a guaranteed income payment that you can never outlive. Therefore, it should be positioned in your portfolio as part of your overall guaranteed income floor.
If insurance companies ever answer that question without information about your specific situation, they are just selling. Most of the time, when people ask how much an annuity pays per month, they're typically talking about income for the rest of their life. There are annuity types with a guaranteed interest rate, like a Multi-Year Guaranteed Annuity, which is the annuity industry's version of the CD. Like Social Security, the older you are, the higher the payment because your life expectancy is less, which means that there are less projected payments, which means those payments will be higher. The reverse is true as well. If you need to start the income sooner, then the income will be less because your life expectancy is more. They aren't investments but instead a transfer of risk strategy for lifetime income based on your life expectancy.
To understand your options thoroughly and make sure you're getting the best plan for your specific situation, head over to stantheannuityman.com to run quotes for yourself or book a one-on-one call with me.