Get Income for Life with Tax Advantages

In annuity the insurance company promises to pay the annuitant a series of income on monthly basis for the rest of his life or pre-specified time in return of a one-time or series of payments. The amount paid by an individual for investment in annuity is usually non refundable. It means once one invest in annuity then one can't get the amount back as it iswithout bringing into picture the aspect called Penalty.

One variation of this plan spreads the annuity over the lives of two people. If the annuitant died in between the time period of annuity then the annuity continues to other people or spouse. One could make an annuity investment with this feature to make sure that the monthly income would continue until the annuitant and the spouse both die. To get this feature or extra, annuitant has to accept a smaller amount of monthly payment.

Another variation is to guarantee for some minimum number of years or until the death of annuitant, which one comes first. If the annuitant died 2 months after buying the annuity, then his/her heirs could keep getting payments for a minimum time period decided earlier.

If one is thinking that he/she might last longer than his/her accumulated money then the fixed annuity is a good way to transfer the risk to an insurance company. The insurance company has to take the risk that he/she might live to be very old. The insurance company also provides the benefit and take the risk of paying promised payments plus a profit to the annuitant. So the payments that invester get will probably be lower than what one could get with other options.