How to Compare Lifetime Annuity Options

If you are considering purchasing a lifetime annuity, you will immediately find out that you have many options in front of you. In order to choose the right lifetime annuity for your situation, you will need to look at several different variables. Here are the basics of how to compare lifetime annuity options.

Interest Rate

When comparing different lifetime annuity options, you need to make sure that you look at the interest rate. The interest rate from annuity to annuity will vary. In addition to a variance in the actual rate, the type of interest rate can also vary. Some annuities will provide you with a fixed rate of interest for the life of the contract. With this type of annuity, you know exactly how much interest you will make and how much your monthly payment is going to be when you retire.

Another type of annuity is the variable rate annuity. With this type of annuity, the interest rate that you receive will fluctuate. The money that you invest will be placed into different investments. Depending on how those investments do, your interest rate will go up and down. This places all of the risk on you.

An index lifetime annuity is another option that you will have. This type of investment is tied to a particular financial index, such as the S&P 500. This investment allows you to gain exposure to the financial markets. However, the entire risk is not shifted to you, as it is with a variable annuity. With this type of investment, you will usually get a minimum guarantee. This means that even if the index performs poorly, you will still be able to make something.

When comparing interest rates, make sure that you are comparing apples to apples. You do not want to compare a fixed rate annuity against a variable rate annuity.

Financial Strength

Most of the insurance companies that provide annuities are considered very strong financially. Although they are all relatively strong, you should pay attention to who you are investing with. Check out the company's financial ratings and make sure that you stick to the highest rated companies in the field. Instead of investing your retirement dollars with a company that is rated a B or C, you should consider sticking with companies that are rated A or A+. Insurance companies could potentially go bankrupt, and you want to decrease the odds of this happening to your retirement funds.

Death Benefit

When comparing lifetime annuities, you will want to pay special attention to the death benefit that they provide. Most annuities have very flexible death benefit options. You can choose if you want a beneficiary to receive part of your annuity payments or if they should receive a lump sum. Make sure that you understand how the death benefit works before signing up for the lifetime annuity payment contract.


Annuities come with different administrative costs. You want to make sure that you are minimizing the amount of money that you pay in administrative and other fees.

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