Opening A Single Premium Annuity Account

Retirement income is an important part of being able to enjoy your golden years. A single premium annuity is one of the options for setting up a steady cash flow. This type of account can be a good choice for someone with a large amount of money that they want to put towards their retirement income.

Annuities are funds that people pay into during the working years of their lives, and which then pay them back during their retirement years. Interest is paid on the money by the financial institute, who typically pays it back in monthly increments. A wide variety of organizations offer annuities for purchase – they are used to fund the organization or financial institute who owns them.

Most annuities are paid into over a period of time, such as months or years. A single premium annuity is one that is paid for by depositing a single large sum of money instead of making these monthly payments. They are useful for people who gain access to a large amount of money all at once, such as a large CD maturing or receiving an inheritance.

Some annuities pay for a set period of time, such as 20 years. Others pay for the lifetime of the recipient. When the recipient of a fixed length annuity dies, it may be possible to transfer the remaining payments to a spouse. However, when the recipient of a lifetime contract dies, their payments are ended.

Payments may also be of various amounts, or a single type. Some annuities pay larger and larger amounts as time goes by. Others allow the policyholders to adjust the payments themselves, which increases or decreases the number of years that the payments will be made. Not all annuities have these options – some simply pay a fixed amount every month for the lifetime of the fund.

As with most items, annuities have both their ups and downs. The major downside is that money in these funds is committed and hard to get to if needed. While if everything goes according to plan, the regular retirement payouts are helpful and just what is needed, sometimes life throws a curve ball. Accessing the money early or all at once usually incurs steep financial penalties.

Most annuities work in a fairly similar manner, and a single premium annuity is no exception. The main feature of this type of fund is the payment made to begin the contract – it is one large lump sum, rather than a series of monthly payments.

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