These Features Will Impact Your Immediate Annuity Quotes

Published August 26, 2017
Your personal attributes and the extra features you choose to customize your immediate annuity with will affect the income you can generate. We’ve broken down how each option will impact your rates.
  • There are a lot of factors and features which can change the income your savings generate
  • Age, gender, premium size, spousal continuation and optional riders will affect payouts

Insurance companies calculate the size of the immediate annuity income payout they are willing to offer based on how long they expect to pay you. Your personal attributes and the extra features you choose on your immediate annuity will affect the income you can generate. Here’s how to think about these:

Feature Let’s Think About It!
Age

Buying when older generates a larger monthly income.

If you purchase an immediate annuity later, you will generate more income, since the insurance company expects to have to pay you for fewer years.

Gender Males will receive larger monthly income than females.

Females have longer life expectancies, and therefore longer payout periods, so they receive slightly less income each month.

Premium Size Larger premiums generate larger monthly income.

While straightforward, there’s another element: larger premiums sometimes receive a discount! A portion of insurance companies’ expenses per contract are fixed, meaning fixed costs are a smaller drag on payouts when premiums are larger.

Single v. Joint Life Single policies generate larger incomes than joint-life policies.

A joint-life policy will continue as long as both policyholders/annuitants are alive, which will be longer than if only a single person is on the policy. Since insurance companies expect longer payout periods, they provide less income each year.

Payout Options Basic plans without extra guarantees generate larger incomes than plans with extra features.

There are plan features you can add to your immediate annuity that will make the guarantee more robust. Features like cash and installment refunds will guarantee a minimum cumulative income, while period certain will guarantee a minimum number of payments. These will lower your income payments because the insurance company expects to pay you for longer.

Riders Basic plans without riders will generate larger monthly income than plans with riders.

Riders, or extra features that offer you increased protection, require that the insurance company take on more risk. Therefore, the income payments will be lower to compensate the insurance companies.

 

Last, there’s often an inverse relationship between the credit rating of an insurance company and the income return they’ll offer for your premium. Insurers with higher ratings maintain higher capital reserves and invest more conservatively, which limits their profits and what income they can offer you. Here at Blueprint Income, we only offer insurers who have an A rating or higher, because the guaranteed income you’re promised is only as good as the financial strength and the longevity of the insurer backing it.

Lauren Minches

Lauren Minches

Financial Planning Professional

Lauren is an actuary by training with expertise in retirement, finance, and risk. She writes about annuities to make them easier to understand and evaluate. Her goal is to help people create retirements with more time for living and less time thinking about money.