To Annuitize, or not to Annuitize

A lot of annuity clients struggle with the decision about whether or not to annuitize their investments, turning them into a monthly income stream that’s guaranteed to last the rest of their lives.  The two biggest factors in the decision are generally…

  • Will I outlive my assets?
  • Will I have anything left to leave to my children?

Look at a hypothetical 65-year old client who has been putting $1,500 annually into a fixed annuity for seven years.  He’s put $10,500 into the account and know he wants to start taking monthly payments.  He wants to make sure that his children get something if he were to die prematurely, so he elects the 10-year period certain payout option.  This gives him an income of $148 per month, or the same payment to his heirs for 10 years after annuitization.

If this hypothetical client were to live for six years, he would get back all that he put into the annuity.  But if he were to live another 26 years, to age 91, he would have taken $46,176 out of his $10,500 investment.

Be sure to include a fixed, firm foundation in your retirement plans.