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As an alternative to receiving guaranteed lifetime payments, income annuities offer payments that are guaranteed for your life and the life of a joint annuitant. Income annuities also offer payments that are guaranteed for a specified amount or specified period. Here are the details.
Also called a joint and survivor annuity, this option pays income to you and your joint annuitant while you’re both living.
Your joint annuitant can be your spouse or someone who isn’t related to you. After the death of either of you, payments continue at either the same or a reduced level for the life of your surviving annuitant. Payments then stop upon the death of you and your joint annuitant, no matter how many payments have been made.
You can select the amount of income your survivor will receive, typically one-half or two-thirds of your initial payment, or the full amount. The size of your initial payment depends on the percentage your survivor receives after your death. The more you leave, the smaller your payment is while you’re alive.
Because the insurance company has to take both your life expectancies into account, and because a combined life expectancy is longer than a single one, this option pays lower payments than payments based only on your life. However, although each individual payment amount is less than a payment that’s guaranteed for only your lifetime, total payments over both your lifetimes can potentially be more.
This option is the same as a joint and survivor annuity with the addition of a guaranteed period.
Specifically, if you both die before the end of the guaranteed period, the insurance company pays a lump sum or remaining payments to your beneficiaries until the end of the guaranteed period.
The insurance company makes payments to you for the amount you choose until your account value is exhausted. If you die before the insurer makes all the guaranteed payments, the insurer makes the remaining payments to your beneficiary.
. This option guarantees payments for the period you choose, typically five, ten, 15, or 20 years. Payments stop at the end of the period. If you die before the end of the period, the insurance company makes the remaining payments to your beneficiary.
Also called a period certain, this option can provide the largest income payments in the short term. With this option you typically have the opportunity to commute, or cash in, your annuity for a lump sum at specified times during the life of the contract.
Article is for educational purposes only and is not intended to provide specific tax or legal advice. For answers to tax questions, please see your tax professional. For legal questions, consult an attorney.
Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC, a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free (800) 369-2862. Nondeposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members. CUNA Brokerage Services, Inc., is a registered broker/dealer in all fifty states of the United States of America. The Representative may also be a credit union employee that accepts deposits on behalf of the financial institution.
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