retirement plan outline

Annuity payout options

·        Lump sum

·        Series of payments for life

·        Period of time in contract

Annuitized

·        payments are based on value of annuity unit

Annuity units

·        insurance company converts accumulation units into annuity units

Assumed interest rate

·        rate at which annuity will grow after insurance company estimates expenses to maintain variable annuity

·        account value=AIR, value-same

·        account value increase > AIR, next payment will > last value

·        account value decrease <AIR< next payment < last value

Annuity period

·        assets stay in separate account-investment risk present

·        or assets transfer into fixed annuity account

Lifetime of payments

·        annuity units paid during lifetime

·        value of units change

·        payments by insurance company may be different

·        change by performance of separate account vs assumed interest rate

fixed number of payments

·        number of units remain same

·        amount of payments depends on performance of separate account vs assumed interest rate

life annuity

·        payments for life

·        no concern for beneficiary

·        upon death payments stop

·        gamble-hope to live long enough to receive all payments

·        if die before pay out period, beneficiary receives

life annuity period certain

·        set period of time payments if longer

·        OR until death of annuitant if longer

·        Can choose 5,10, or 20 years to receive payments

·        Die before period ends, beneficiary gets remaining payments

·        If buyer lives longer than period, gets payments till death

Joint and last survivor life annuity

·        Payments until annuitant dies

·        Transfer payments to survivor until survivor dies

·        Popular for husband and wife

·        Payments made until husband and wife die

Specified amount annuity

·        Payments for a specified amount until value of annuity drained/reduced

How payout is calculated

·        Insurance co. converts accumulation units into total

·        Annuity units, based on age,sex,type of payout-co. decides beginning value

·        Insurance co. decides amount of units buyer gets per period based on payout option

Variable annuity guarantees

·        Expenses won’t be greater than x amount

·        Mortality guarantee, payment until buyer dies

·        No market guarantees

·        Buyer gets fixed # of units every mo, value of units changes based on account

The annuity units that are paid out during the annuity period are:

·        Fixed number of units with variable values

·        Same # of units each pay period

·        Unit amount changes