Many investors have grown financial assets in the stock market, and as retirement approaches, they begin to think about buying an annuity. There are two different types of annuities that may help you in retirement: immediate and longevity annuities.
The Single Premium Immediate Annuity is a good choice for a portion of an investor's income-producing financial assets. Immediate annuities, also referred to as Single Premium Immediate Annuities (SPIAs), are simple to understand. The investor gives an insurer a certain amount of money in a lump sum. This is the premium payment. There is only one, a “single premium.” After the insurance company processes the application, the insured receives a monthly income for as long as he or she lives. The income amount is guaranteed and is not tied to financial markets or the insurance company’s portfolio performance.
The Longevity Annuity, on the other hand, reduces the fear of outliving retirement money. According to a longevity study performed by Rice University, today's Baby Boomers are likely to live twenty, thirty, or forty years longer than their grandparents. So, a longevity annuity is similar to the SPIA structure in that the annuitant gives the insurance company a lump sum in order to receive monthly income payments. Although the insured makes the single premium payment today, his or her monthly payments do not begin until a pre-determined future date. In some cases, the future date is many years from today.
