Retiring can seem complicated, especially when it comes to understanding the legal terms and concepts associated with it. One such term is annuitant, and it’s important to understand what it means in order to make the most of your retirement. In this guide, we’ll explain what an annuitant is and how it relates to the retirement benefits you can receive.
What Is an Annuitant?
An annuitant is someone who owns a retirement account and receives periodic payments from it when they reach the designated retirement age. The payments are typically made for the remaining lifetime of which ever annuitant is designated by the account owner – most often, that’s themselves. This payment is regularly secured and managed, and is based on the funds held in the annuity.
Types of Annuities
An annuity is a type of insurance product that will provide a lump-sum of money to the annuitant once it’s funded. The most popular types of annuities include:
- Immediate Annuities: An immediate annuity is a contract with an insurance company where an individual pays a lump sum in order to receive periodic payments, typically beginning within the first year of the contract.
- Deferred Annuities: A deferred annuity is a contract with an insurance company, where an individual schedules recurring payments in order to receive periodic payments later on. These payments usually begin at a designated retirement age, such as 65.
- Variable Annuities: This type of annuity offers variable returns based on the performance of certain investments, such as stocks and mutual funds. It is important to keep in mind that here your investments are subject to market fluctuations, so there is some risk involved.
- Fixed Annuities: This type of annuity offers a guaranteed return rate on your invested money. A fixed annuity will usually pay a fixed rate of interest for a set period of time — however, this rate can vary depending on the type of annuity you invest in.
Advantages of Annuities
An annuity can be a great way to ensure your financial security in retirement. The advantages of annuities include:
- Guaranteed income.
- A reliable source of financial security.
- Tax deductions.
- A good way to supplement Social Security income.
Conclusion
Annuities can be an invaluable tool for securing your financial future in retirement, so it’s important to understand what an annuitant is and how it relates to retirement benefits. Make sure to consider all of the options available to you when deciding whether or not to pursue an annuity, and research the different types of annuities to determine what’s right for you.