Annuity Settlement Options Annuitize Or Lump Sum

Annuity settlement options can be confusing. Many people have purchased annuities of all types of tax deferral feature. For many retirees it is time to make the transition from accumulation to payout. Here are some considerations to determine what is best for you.

The most popular annuity settlement option annuitization to take payments over a time frame that you select, which may include the rest of your life. When you annuitize, you receive payments (monthly, half yearly and annually) in exchange for surrendering your annuity to annuity insurance. Your annuitization options usually include:

• Lifetime Income
• Period Certain
• Period Certain Plus Life

Here is how Lifetime Income works. Let's say you have $ 100,000 in an annuity and the insurance company has calculated that because of your age and sex, it will pay you $ 1,500 a month as long as you live. You collect $ 1,500 the first month, $ 1,500 in the next month, and $ 1,500 the following month. So you get run over by a truck and dies. You bet the insurance company you would survive your $ 100,000 and you lost. $ 4,500 is all you get, they keep the rest. This is perhaps not so good deal.

Your second option is called Period Certain. This means you can take your money out over a period of 5, 10, 15 or 20 years. The insurance company guarantees to pay all your money (plus interest) in this period. If you do not live up to the end of the period, your beneficiary receives the remaining funds in your annuity over the remainder of the period. Live or die, you or someone else comes back all your money.

The third option is Period Certain Plus Life. Here, the insurer guarantees to pay you a check each month for a certain period, plus if you live beyond that period (even if you live to be 150 years old) you will receive monthly income that you can not survive.

Elections are not so simple. A monk in a monastery, for example, may well expect to live to a ripe age and do better with a Lifetime Income (Though we wonder what he would spend the money on). Someone with a terminal illness may want to take a lump sum settlement or a five-year period certain. Take a closer look at such factors as your health and spouse's health, your age and spouse's age, other sources of income and your tax bracket.

For more flexibility, you can choose to Systematic Withdrawals. In this case you will receive a fixed percentage of the account value or a fixed monthly amount. To stop this scheme at any time and simply withdraw your remaining balance.

Although Systematic Withdrawals appear to have advantages over annuitization, note these two differences: With annuitization as your annuity settlement option, you can lock in a guaranteed monthly income, regardless of the performance of your annuity. In addition, annuitization prolong the tax deferral period since only a portion of each payment is taxed. IRS believes, on the other side of your payments are a return of principal.

Finally, you may want to just keep the annuity grows and does not take payments at all. Some annuities, however, do not allow this and force withdrawal of a certain age. One option for you is a tax-free exchange to another annuity that may have more liberal withdrawal requirements, but watch out for surrender charges on your existing policy.

You've probably never thought getting a check could be so complicated. It really is not as messy as it sounds. Actually, we have annuity agents throughout the United States who specialize in solving such problems. There is no charge or obligation. To get your selections in fact we will be happy to review any type of annuity settlement option and figure it's most appropriate withdrawal option for you. Just click on Professional Review and complete the form.