A Future Financial Security Matter; What is Annuity Certain?
What exactly is an annuity, and when would it be an appropriate purchase? An annuity contract is purchased from an insurance company. Most often, it is used as a vehicle for saving for retirement or to guarantee an income for life. There are many kinds of annuity nowadays, the kind of annuity depends on the payment method, and also the number of benefit gained from it. An annuity offered by an insurance company must be highly qualified since it deals with our future life.
So What is Annuity Certain? Annuity that, as a minimum, guarantees a fixed number of payments. It continues over the life of the annuitant, even if he or she lives beyond the number of payments specified in the annuity contract. In case the annuitant dies before exhausting the payments, a named beneficiary continues to receive the remaining number. Also called life annuity certain or life annuity certain and continuous.
Term Certain Annuity
Term-certain payout annuities pay guaranteed income payments for a specified period of time. If you die before the annuity reaches the end of the term, the beneficiary receives a lump-sum payment equal to the value of the remaining benefit. If your spouse is your beneficiary, he or she may choose to receive the lump sum or to continue receiving payments until the end of the term. Policies purchased with registered assets are eligible for terms equal to 90 less your age in full years at the time of purchase. For example, if your age is 65, the term would be 25 years (90-65=25). You can also calculate the term using your spouse’s age if he or she is younger. Term certain annuities are not available for plans where the source of funds is locked-in.Policies purchased with non-registered funds are eligible for any term from a minimum of 1 year to a maximum of 40 years (or age 95, whichever comes first).
Period Certain Annuity
Period Certain Annuity is an annuity in which the annuitant selects a certain number of years during which he/she will receive payments. For example, an annuitant may elect to receive annuity payment each month for 20 years. This allows the annuitant higher payments each month, but it is nevertheless less common than life annuities, which provide payments for the remainder of the annuitant’s life. Using period-certain annuities as retirement packages may appeal to persons who do not expect to live the full term of the annuity and/or persons who have another source of income (such as another annuity) in retirement.