In simple words, a life annuity is an annuity that continues to pay out as long as the annuitant is alive. In normal conditions, the annuitant pays into an annuity contract on a periodic basis while in service. After retirement, the annuity company makes periodic (usually monthly, yearly, or half yearly) payouts to the annuitant, providing a steady source of income. Annuitants also have the option to buy annuity products in one lump sum purchase. After retirement, when a triggering event like death occurs, the periodic payments usually cease. However, with more and more options emerging in the annuity business, the chances of having your money back are increasing, in spite of an event like death.

Most life annuities come with tax benefits. This means that the money you put into annuity every year during your service life is not taxed by the government. Hence the money remains tax free till the time you take them out. Due to such tax-preferred nature of annuities, most above-average income earners use these financial products to transfer large sums of money as savings. This mitigates the burden of annual tax and insures a future steady payment.

One always gets reminded of situations and times when the means of livelihood ceases or gets diminished. Retirement or illnesses are such common phases of our life and it is realistic to plan for such times, especially if one has a family to support too. Life annuities are aimed at such interests. They are designed to protect the savings of the middle-income people, and provide a steady source of income in their retirement years.

In terms of getting the money back, there are different formats. Two of the popular retirement annuity products that are offered in the market, are the ‘tax-deferred life annuity’ and the ‘immediate annuity’. Both of these are under the broader category of ‘life annuities’. A ‘tax deferred annuity’ is where your taxes on the interest are usually paid out annually. An ‘immediate annuity’ is a system where conversion of all or part of the savings into a guaranteed source of income, after the retirement is allowed. The return is then to be received either monthly or in lump sum. In this version, tax is calculated at the end.

So whatever forms of Life Annuity you choose, it is important to check out all the associated Death Benefit provisions from before.

The discussions of life annuity can span a wide arena. To learn more details about life annuity, visit AnnuityLibrary.com, where we post updates and latest schemes from the industry and serve to your queries. To submit your questions online, Click here or call toll-free at 1-800-998-4056.