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Explore the value of continual payout options when planning for lifetime income in retirement

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Explore lifetime income options

If you decide upon a life annuity, know that it is an annuity, or series of payments at fixed intervals, paid while the purchaser is alive. A life annuity is an insurance product typically sold or issued by life insurance companies.

How it works: Through a continual payout option available with a lifetime annuity, a portion of your annuity’s cash value would be converted into a series of payments over a certain amount of time. During that period, usually five years, you would receive a guaranteed income. The rest of your account balance would earn tax-deferred interest, potentially replenishing the annuitized portion, and would remain available for use in case of an unforeseen financial situation. At the end of the period, depending on interest rates, you could potentially repeat this process again.

With this option, you can annuitize a portion of your annuity’s cash value every five years. Meanwhile, your remaining cash value earns interest and has the potential to return to approximately its original level. Depending on interest rates, you could potentially repeat the process again. Here are some examples:

Continual Payout Options

Assumes 6.00% Current Interest 3.00% Guaranteed Interest
Age Beginning Balance Monthly Income over 5-Yr Period Cumulative Income Balance at End of Period with Interest Monthly Income over 5-Yr Period Cumulative Income Balance at End of Period with interest
60-65 $100,000 $484.40 $29,064 $100,000 $246.02 $14,761 $100,000
65-70 $100,000 $484.40 $58,128 $100,000 $246.02 $29,522 $100,000
70-75 $100,000 $484.40 $87,192 $100,000 $246.02 $44,284 $100,000
75-80 $100,000 $484.40 $116,255 $100,000 $246.02 $59,045 $100,000

This hypothetical illustration assumes $100,000 beginning balance and withdrawals made at the beginning of the month. Annuity rate based on current interest rate. Actual performance will vary depending on current interest rates effective at time of benefit election. Does not reflect IRS RMDs (Required Minimum Distribution) requirements for qualified funds.

To learn more about annuitization and the various types and definitions, read more in the article Transforming Your Retirement Assets Into Income, then consider having a conversation with a financial professional to talk more about how annuities could be beneficial, or not, to your circumstances. An advisor can give you more in depth information as it pertains to what is right for you.