MONEY MATTERS: A closer look at income annuity
What is an income annuity and how does it work?
An income annuity is for someone generally that is retired and they need income. You can put it in CDs or you can use some of you money into a fixed income annuity. Which will pay a fixed guaranteed lifetime income. The advantage of it is you can take a higher payout amount without worrying about running out of money because the risk is on the insurance company. They have to pay you for the rest of your life.
What do insurance companies have to do with annuity's? A lot of people don't realize annuity is working with insurance companies.
That is correct an annuity is an insurance based product. The biggest advantage of it is for someone where it generally fits is no one wants to put all their money there. Maybe a supplement because you're creating an income stream like a social security or a pension. And then it makes some sense to have some other monies obviously that's invested in stocks, binds, etc.
What happens if someone passes on and they have an annuity. What happens to that annuity?
There's 4 or 5 payout options. One is we'll do a cash refund or a period certain. A period certain means I get it paid to me over my life. But let's say I die within 15 years then my beneficiaries continue to receive it for the next say fifteen years. You'd recover all your principle.