Maryland Annuity Resource offers Annuities in Maryland, Washington D.C. and Virginia. We believe that Annuities are a foundation to any investment portfolio. Annuities have payout options and it is important to understand the differences. We go over all of your options below.
When you own an Annuity, the ultimate question is when it comes time to receive your money back is what are my options. It is your money and you have many choices, but it is very important to understand the differences in Annuity Payout Options. You have built up this nest egg and you want to make it last so think seriously about how you want to receive payments. You also want to think about tax implications of your payments and if your original plan was qualified or non-qualified. Below are some Annuity Payout Options you would have to choose from for most carriers. These are not all standard for all contracts so make a plan and know all of the contact features.
- Life Only – The insurance company makes payments for as long as you live. The payment amount is mainly decided by life expectancy or a set percentage rate determined by the contract. The longer your life expectancy, the smaller the payment amount. You are guaranteed the income for the rest of your life. If you live a real long time, you could receive more than the accumulated value of the annuity.
- Life with Period Certain – Life with Period Certain gives you an income stream for life, like the Life Only option. You also have the option to select a guaranteed period, such as a 10-year guaranteed term. This means your annuity must pay your estate or beneficiaries even if you die before that guaranteed period ends.
- Joint and Survivor Life – The insurance company pays you or your survivor for as long as either of you are alive. The amount of the regular payments are typically smaller than the Life Only option, as the company now pays for the longer of two lifetimes. Females do statistically live longer than males so that will effect payments.
- Period Certain – You choose a defined period of time (e.g. 10, 15, or 25 years) to receive the payout of funds from your annuity. Payments after your death may go to your designated beneficiary. An example of this is if you choose a 15-year fixed-period payout and die within the first 10 years, the contract is guaranteed to pay your beneficiary for the remaining five years.
- Fixed Dollar Amount – You have the choice and can select the amount you want to receive each month, quarterly, or yearly. The payments continue until you stop them or you run out of money. One thing to remember is that the insurance company does not guarantee that you’ll not outlive your income payments. How much you receive and how many months you receive payments depends on how much you have in your account.
- Lump Sum Payment – The lump sum payout option allows you to receive your annuity payout in one lump sum. We do not usually recommended this option because, in the year you take the lump sum, you’ll have to pay income taxes on the entire investment-gain portion of your annuity which is the interest you have accumulated.
- Death Benefit – Most annuity contracts, the insurance company may pay a death benefit to your beneficiary if you die before the income payments start. The most common death benefit is the contract value or the premiums paid, whichever is greater. Check your contract and payout options not only to you but your beneficiaries.
10% Penalty Free Withdrawals
Most Annuity carriers have special withdrawal provisions that gives you access to the funds within your account. Usually after the first contract year you are allowed to withdrawal 10% of the account value. It is important to remember that if your account has an income rider attached. What ever percentage you withdrawal from the main account will proportionately effect the rider account value by that same percentage.
Surrender Values of Annuities
The Surrender Value of your contract is the amount that is available at the time of surrender. The Surrender Value is equal to the Accumulation Value, subject to the Market Value Adjustment less applicable surrender charges, state premium taxes and Premium Bonus Recapture (if applicable). The Surrender Value will never be less than the minimum requirements set forth by state laws at the time of issue where the contract is delivered. The market value adjustment is only applicable during surrender charge periods.