Up To 9.1% Annual Cash Flow Guaranteed? Which Annuity Payout Option Pays More?

Guaranteed retirement income at age 55 or older? Let’s walk through how much your safe & predictable monthly check for life might potentially be with a single premium immediate annuity (SPIA), depending on gender, age and other factors.

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6.1% to 9.1% guaranteed cash flow paid monthly for life. Let's walk through exactly how much your monthly safe and predictable check for life could potentially be with a single premium immediate annuity, a SPIA. Hello Diamond Estec Member Super Savers and Course fans. I hope you're healthy and well. As long-term interest rates have trended upwards recently, so have the rates of many types of annuities, including single premium immediate annuities or SPIAs. So let's look at what this might mean in terms of actual dollar amounts that would hit your bank account. Here are the three topics I'll be covering today. One, what are two common payout options that you can choose from for your SPIA? Two, how much might your monthly check be depending on your age? And three, how do the numbers change if your annuity covers two lives? For example, if the annuity provides guaranteed lifetime income so long as either you or your spouse are alive. Let's dive in now, folks, and find out. What are two common payout options that you can choose from for your SPIA? So the two payout options for your SPIA, your single premium immediate annuity that we'll be walking you through in this video are life with a 10-year period certain and life with cash refund. A life with 10-year period certain payout means that you're guaranteed your fixed monthly SPA check for life, but at least for a minimum of 10 years. If you pass away before the minimum guaranteed payment period of 10 years, your beneficiaries will keep getting the monthly SPIA checks that you would have received until the 10-year minimum guaranteed payment period is over. After the 10-year minimum guaranteed payment period is over, though, these monthly annuity checks to your beneficiaries would stop. If you live longer than the 10-year minimum guaranteed payment period, you would still continue to receive your monthly annuity checks for as long as you live. But upon your death, those payments to you would end with nothing further going to your beneficiaries. Instead of life with a 10-year period certain payout option, like we've been talking about in this example, you can also choose life with a 5-year, 15-year, or 20-year period certain as your SPIA payout option. In all cases, you will get your monthly check for as long as you live. The only difference is that your minimum guaranteed payment period, during which time payments would continue to your beneficiaries, even if you were to die beforehand, would change. So life with a five-year period certain payout means the minimum guaranteed payment period would be five years, and life with a 15-year period certain payout means the minimum guaranteed payment period would be 15 years, and so on. Moving on now to life with cash refund. This is also sometimes referred to as single life with cash refund or a life annuity with cash refund. Life with cash refund also guarantees you income for life, no matter how long you live. But if you pass away before your initial premium has been fully returned to you in the form of monthly checks, your beneficiaries would receive any unused premium that was not paid out to you as a lump sum refund. So, for example, if you buy a $100,000 SPIA with a life with cash refund payout option and you pass away after receiving only your first annuity check next month, the insurance company would have to return your unused premium back to your beneficiaries, meaning the initial $100,000 that you had invested minus that first monthly annuity check that was sent to you. Your beneficiaries will never receive more than the unused premium amount under life with cash refund. Compare this to life with a 10-year period certain, where if you pass away after receiving only your first annuity check, the insurance company would keep paying out your monthly SPIA check to your beneficiaries for the next 10 years until the minimum guaranteed payment period ends. So until the 10 years are over. And the total sum after all payments have been made over this 10-year period certain may be more, less, or possibly even the same as the premium you paid in. In other words, if you pass away earlier, your beneficiaries may receive more, less, or even the same amount as the unused premium that they would have received under a life with cash refund option. You just don't know beforehand. Generally speaking, you may want to choose a life with period certain if you want payments for a guaranteed minimum number of years, either for yourself or for your heirs if you pass away early. And you may want to choose life with cash refund if the guaranteed minimum payment period is not so important to you, but you want your heirs to get any leftover principal that you've paid in back in one single payment. Life with period certain and life with cash refund are just two popular payout options to consider for SPA. There may be other choices as well, some of which may even give you a higher monthly check for life, depending on what your individual situation might be. So drop a note below if you want to learn more about the top five SPA payout options, or email us at jenniferdiamondnestic.com so that we can connect you with our trusted annuity specialist. So you don't have to figure out the annuity complexities on your own. And let's move on now and see where the monthly SPIA payouts stand at the time of this taping. How much might your monthly check be depending on your age? Let's assume that you're planning on investing $100,000 into a SPIA from one of the highest-rated or safest insurance companies in the market. Here are some sample SPIA payouts for life. In this column, we have the age at issuance, and in this section, we'll show you what the monthly income and the annual cash flow may look like for a life with a 10-year period certain payout. So if you're male and your age at issuance of the SPIA is 55, at the time of this taping, under a life with 10-year period certain payout, your monthly income or check might be about $525. What this means is that you would get this potential amount every month for life, but in any case for a minimum of 10 years. If you pass away before the minimum guaranteed payment period of 10 years, your beneficiaries will keep getting that monthly SPIA check of $525 that you would have received until the 10-year minimum guaranteed payment period is over. After the 10-year minimum guaranteed payment period is over, though, those monthly annuity checks of $525 to your beneficiaries would stop. If you live longer than the 10-year minimum guaranteed payment period, you would still continue to receive your monthly annuity check of $525 for as long as you live. But upon your death, those payments to you would end with nothing further going to your beneficiaries. This potential monthly check of $525 translates into an annual cash flow of 6.3%. This 6.3% is calculated by taking the monthly income of $525, multiplying by the 12 months in a year, and dividing it by your original investment amount into the SPIA of $100,000. Compare this to a life with cash refund payout for a 55-year-old male, where your monthly income might be around at $517, which translates into an annual cash flow of 6.2%. So a bit less than if you had chosen a life with 10-year period certain payout. Because again, under life with cash refund, there's no minimum guarantee period that the insurance company has to make monthly payments. If you pass away earlier than expected, the insurance company does not have to keep paying your beneficiaries until the minimum guarantee period is over. All they need to do is return the unused premium, if any, as a lump sum to your beneficiaries. Do note though that the monthly annuity check from a life with cash refund option is not always lower than with a life with period certain payout. It all depends on the minimum guarantee period that you choose as your period certain. Generally speaking, and all else being equal, the longer your period certain is, the lower your monthly check might be. Which also means the longer your period certain is, the more likely that your payout will be lower than if you had chosen a life with cash refund option. In other words, all else being equal, if you choose a life with 20-year period certain payout, your monthly check would usually be lower than life with a 10-year period certain payout, and also likely to be lower than life with a cash refund payout. So here's what the numbers might look like if you're male and your age at issuance of the SPIA is 60, 65, 70, and 75. It should be no surprise that the older the age at issuance, the higher your monthly income and the annual cash flow percentage might be, because the greater the likelihood that the insurance company will have to pay for a shorter period of time. So, for example, if you're male and your age at issuance of the SPIA is 75, under a life with 10-year period certain payout, your monthly income might be a bit more than $759, which translates into an annual cash flow percentage of 9.1%. This is about $234 more every month than the $525 or 6.3% that you would have received if the age at issuance had been 55%. And here's what the numbers look like under the two payout options if you're female. They are a bit lower overall because as we've discussed before on this channel, women tend to live longer than men on average. So the expectation from the insurance company is that all else being equal, they will typically have to pay a female longer than a male. So if you're female and your age at issuance of the SPIA is 55, at the time of this taping, under a life with 10-year period certain payout, your monthly income or check might be about $510, equivalent to a 6.1% annual cash flow. This is about $15 less per month than for a similarly aged male, meaning the annual cash flow is 0.2% lower. And this difference grows with age as well. So all else being equal, if you're female and your age at issuance of the SPIA is 75, your monthly income might be close to $719, about $40 less per month than the $759 you would have received as a similarly aged man. And this translates into an annual cash flow percentage of 8.6% for a female versus 9.1% for a male at age 75. Remember though that these rates and numbers are for illustrative purposes only. Your actual rates may depend on a number of other factors and will only be fixed when you sign your annuity contract. If you're interested in what your personal rates and payouts might look like at the time you're watching this video, email us at jennifer at diamondnestec.com so that we can connect you with our trusted annuity specialist. Right, now that you know what the monthly guaranteed checks for life could potentially look like for an individual based on gender and age, let's see what the numbers show for the married super savers in our community. How do the numbers change if your annuity covers two lives? Joint life is the most common SPIA payout option amongst couples because it guarantees the income for as long as one spouse is alive. This also means that the monthly payments are usually lower than the numbers that we just shared with you for single life payout, as you can see here. So if you're investing in a SPIA with a joint life payout and your age at issuance of the SPIA is $55, at the time of this taping, under a life with 10-year period certain payout, your monthly income or check might be just about $483. About $27 less than for an individual female and $42 less than for an individual male. This translates into an annual cash flow percentage of 5.8% for joint life versus 6.1% for an individual female versus 6.3% for an individual male. And this difference increases quite a bit with age. So all else being equal, if you're investing in a SPIA with a joint life payout and your age at issuance of the SPIA is 75%, at the time of this taping, under a life with 10-year period certain payout, your monthly income or check might be just under $659. About $60 less than for an individual female and pretty much $100 less than for an individual male. This translates into an annual cash flow percentage of 7.9% for joint life versus 8.6% for an individual female versus 9.1% for an individual male. It's also interesting to note in this illustration that with joint life, at earlier issuance ages, like at ages 55, 60, and 65, the monthly income from life with a 10-year period certain payout is a bit lower than life with a cash refund. And at later issuance ages, like at ages 70 and 75, this switches. The differences aren't that big though, usually about $1 per month. So let's just set it aside for the purposes of this video. Again, please keep in mind that these sample SPIA payouts are for illustrative purposes only at the time of this taping on April 2nd. Rates are subject to change, and your rates and payouts will not be locked in until you sign your annuity contract. Remember that there are a number of different factors that can impact the monthly guaranteed income that you may potentially get for life. Your gender, your age at issuance, how many lives you wish to protect and for how long, and even your state of residence and insurance company's credit rating, etc. etc. As I touched upon earlier, there are a number of other common payout options for SPIAs that we haven't even talked about today. So if you're interested in hearing about those, leave us a comment below. In addition, recall that with a SPIA, you typically make one single large upfront payment to the insurance company, the premium. And very shortly after your payment, sometimes as soon as the end of the month, the insurance company will already begin to pay you a guaranteed monthly, quarterly, or annual income for the rest of your life, depending on the payment frequency you choose. A SPIA is an irreversible contract once the 30-day free look period is over. After that point, you cannot ask the insurance company for your premium back. There's no surrender period like there may be with other types of annuities. So make sure you check all your boxes and have all your questions properly answered beforehand. As Marcus and I like to say, annuities come in many different flavors, and there is no one size fits all cookie cutter solution. So if you're looking for the one that best suits you, shoot us an email at jenniferdiamondnestec.com so that we can connect you with our trusted annuity specialist. Alright, Diamond Nestec members, Super Savers and Course Fans, I hope you enjoyed today's video and learned something new. And see you guys very soon with more brand new wealth building content for your financial journey.