Why Income Annuity is Getting Favorite?

Wednesday, September 25, 2019
Income gap, just for illustration (credit to Vanguard)

For my international friends, in case you did not know, Income annuity is an investment to provide monthly income which last for life time.

This is a kind of guaranteed income to avoid outliving of our income. We may get income payment as policy signed. People usually get regular income in the future, especially after retirement ages.

There are two choice: fix or variable regular income. Variable may fluctuate which depend on market interest.

Then, Why Income Annuity is Getting Favorite? Here the reasons:
- filling the gap of income after retirement
- may last for life or until age of 85 (depend on policy we chose)
- no annual contribution limit, while retirement accounts of 401(k) and IRAs have limitation.


Calculation of annuity payments

For better understanding, let’s say we buy US$ 100,000 annuity policy. How much regular monthly payment if we start to receive annuity income at age 60 years old?

We do simple calculation based on available formula or using calculator. Calculation is depending on some factors:
- the annuity market rate (offered by insurance agencies) ranges from 3.7% to 8.1%. We choose 6% for example only
- We estimated our lifespan reach 85. Thus number of period: 85 years old – 60 years old = 25.

Hence, the regular monthly payment is US$ 651.9 (US$ 7822.67 annually). We receive this payment for 25 years.

If we wish to get monthly payment of US$ 1500, thus, we need to invest around US$ 240,000.

How about if we die before receiving 25 year payment? Our spouse or kids will get the balance.

36 comments:

  1. Replies
    1. Thank you to visit:
      Why Income Annuity is Getting Favorite?
      -
      Income gap, just for illustration (credit to Vanguard)

      Delete
  2. This is very interesting, Tanza. You've shared some helpful information, thank you for that. Wishing you a Happy Thursday!

    ReplyDelete
    Replies

    1. Have a great day to you

      Thank you to visit:
      Why Income Annuity is Getting Favorite?
      -
      For my international friends, in case you did not know, Income annuity is an investment to provide monthly income which last for life time.

      Delete
  3. Estupendo post!
    Espero verte pronto por mi blog! Feliz día!
    ♡♡♡

    ReplyDelete
    Replies
    1. Thank you to visit:
      Why Income Annuity is Getting Favorite?
      -
      This is a kind of guaranteed income to avoid outliving of our income. We may get income payment as policy signed. People usually get regular income in the future, especially after retirement ages.

      Delete
  4. Replies
    1. Thank you to visit:
      Why Income Annuity is Getting Favorite?
      -
      There are two choice: fix or variable regular income. Variable may fluctuate which depend on market interest.

      Delete
  5. Replies
    1. Thank you to visit:
      Why Income Annuity is Getting Favorite?
      -
      Then, Why Income Annuity is Getting Favorite? Here the reasons:
      - filling the gap of income after retirement
      - may last for life or until age of 85 (depend on policy we chose)
      - no annual contribution limit, while retirement accounts of 401(k) and IRAs have limitation.

      Delete
  6. Replies
    1. Thank you to visit:
      Why Income Annuity is Getting Favorite?
      -
      Calculation of annuity payments

      Delete
  7. It's a very interesting information. Learned today about Income Annuity and why it's getting favorite.
    Tanza, thank you for this information!!!

    ReplyDelete
    Replies
    1. Thank you to visit:
      Why Income Annuity is Getting Favorite?
      -
      For better understanding, let’s say we buy US$ 100,000 annuity policy. How much regular monthly payment if we start to receive annuity income at age 60 years old?


      Delete
  8. Replies
    1. Thank you to visit:
      Why Income Annuity is Getting Favorite?
      -
      We do simple calculation based on available formula or using calculator. Calculation is depending on some factors:

      - the annuity market rate (offered by insurance agencies) ranges from 3.7% to 8.1%. We choose 6% for example only

      - We estimated our lifespan reach 85. Thus number of period: 85 years old – 60 years old = 25.

      Delete
  9. all of this just gives me anxiety, having to make those kind of decisions

    ReplyDelete
    Replies
    1. Thank you to visit:
      Why Income Annuity is Getting Favorite?
      -
      Hence, the regular monthly payment is US$ 651.9 (US$ 7822.67 annually). We receive this payment for 25 years.

      Delete
  10. I like to see this inPortugal but our salaries are so low!
    xoxo

    marisasclosetblog.com

    ReplyDelete
    Replies
    1. I see...

      Thank you to visit:
      Why Income Annuity is Getting Favorite?
      -
      If we wish to get monthly payment of US$ 1500, thus, we need to invest around US$ 240,000.

      Delete
  11. Replies
    1. Thank you to visit:
      Why Income Annuity is Getting Favorite?
      -
      How about if we die before receiving 25 year payment? Our spouse or kids will get the balance.

      Delete
  12. Very interesting, you know so much about the numbers☺

    ReplyDelete
    Replies
    1. Thank you to visit:
      Why Income Annuity is Getting Favorite?
      -
      Income gap, just for illustration (credit to Vanguard)

      Delete
  13. Replies
    1. Thank you to visit:
      Why Income Annuity is Getting Favorite?
      -

      Delete
  14. Good to hear that the balance is distributed:)

    ReplyDelete
    Replies
    1. Thank you to visit:
      Why Income Annuity is Getting Favorite?
      -
      For my international friends, in case you did not know, Income annuity is an investment to provide monthly income which last for life time.

      Delete
  15. It’s always a good idea to plan ahead for retirement. This is very helpful information!

    ReplyDelete
    Replies
    1. Thank you to visit:
      Why Income Annuity is Getting Favorite?
      -
      This is a kind of guaranteed income to avoid outliving of our income. We may get income payment as policy signed. People usually get regular income in the future, especially after retirement ages.

      Delete
  16. Very good idea. Thanks for the information.

    Best regards

    ReplyDelete
    Replies
    1. Thank you to visit:
      Why Income Annuity is Getting Favorite?
      -
      There are two choice: fix or variable regular income. Variable may fluctuate which depend on market interest.

      Delete
  17. Replies
    1. Thank you to visit:
      Why Income Annuity is Getting Favorite?
      -
      Then, Why Income Annuity is Getting Favorite? Here the reasons:
      - filling the gap of income after retirement
      - may last for life or until age of 85 (depend on policy we chose)
      - no annual contribution limit, while retirement accounts of 401(k) and IRAs have limitation.

      Delete
  18. Good info but I am not ready to think about retirement yet. I think my best option is going to be winning the lottery.

    ReplyDelete
    Replies
    1. me too...I would like to win lottery.

      Thank you to visit:
      Why Income Annuity is Getting Favorite?
      -
      Calculation of annuity payments

      Delete