In the world of financial planning, a contingent annuity is a type of retirement income product that is dependent upon certain conditions being met. It provides income for a designated beneficiary, typically a spouse or other close relative of an annuitant. These annuities may provide a death benefit to the designated beneficiary after the annuitant dies.
Contingent annuities are specific types of annuities which are designed to provide income during retirement. Like all annuities, a contingent annuity is an agreement between you and an insurance company which provides retirement income. The main difference is that contingent annuities are tied to certain conditions, typically related to the annuitant’s age, health, or other circumstances.
For example, a joint and survivor annuity may provide income for you and your spouse until your death. After your death, the annuity will provide continued payments to your designated beneficiary. Likewise, a last survivor annuity pays benefits until the death of the last survivor of two annuitants who bought the annuity.
Beyond that, contingent annuities can also be used to provide a form of long-term care insurance, paying benefits if the annuitant becomes too ill or disabled to care for themselves. Or, they may be designed for those seeking immediate payment of annuity benefits, such that if you pass away shortly after starting the annuity, the company will still pay the remaining benefits to your designated beneficiary.
Ultimately, contingent annuities are a powerful financial planning tool for retirees. Whether you’re looking for a long-term retirement income stream or a form of life insurance, they can provide powerful security for you and your family. Before deciding to invest in a contingent annuity, consider speaking to a financial advisor to determine if it’s the right financial strategy for you.