Annuity Payouts: Choices For Your Retirement Income

So you want to invest in an annuity for your retirement and are wondering how and when you will get your invested money? When you decide to purchase the annuity, there are several options available to you for how you receive your benefits and even what will happen to your annuity after your death. The annuity payout is the financial term for when an annuity has finished accumulating the defined amount of interest and payments to the annuity’s holder begin to be sent out. Keep in mind that as long as your annuity is still accumulating interest, you can usually add more to the account. The good thing is, the annuity accumulates interest without you having to pay taxes until you start to take your money out (although you can start withdrawing funds tax-free starting at the age of 59 and a half per federal regulations).
Once you’ve decided to purchase an annuity, you will need to decide how to handle the annuity payouts once they begin: a systematic withdrawal schedule or annuitization. If you’re like most people who buy an annuity for retirement income, you’ll most likely choose the annuitization system. This way, you are assured of receiving a monthly check for the specified contract period. While this is the most reliable way to receive payouts, you really don’t have control over the distribution of your benefits once it begins.
If you do choose annuitization, the life option is probably the way to go if you’re single and don’t want to pass along your annuity to a loved one or beneficiary. This option will keep paying out as long as you’re alive; it’s that simple. It’s the “set it and forget it” method for annuity payouts. If you have a family or wish to keep the revenue stream going for a beneficiary, you may want to opt for joint-life instead. This continues the payments to your spouse or designated beneficiary after you pass away. Of course, if you can’t decide between the two, perhaps the period certain option is for you. This lets you set the regular monthly payments for a set period of years so if you die before the period is up, your beneficiary will receive payments for the rest of the term.
If you would like more control over how your annuity payouts are delivered, then the systematic withdrawal schedule is for you. This method has its drawbacks too however; it is entirely possible you could outlive your annuity’s balance, which could have disastrous consequences. Under a systematic withdrawal schedule, you have control over how much you want paid out each month depending on how much you have in your account. This option usually includes a provision to receive a lump sum payment from your account at any time, but you’d best be prepared to lose a significant amount to taxes so if you choose the systematic withdrawal schedule only take the lump sum payment as a last resort. Armed with these facts, you should be able to navigate the twists and turns of annuity payouts and enjoy your retirement.