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A single life annuity is a type of insurance policy that only covers a single individual. While most married couples choose an annuity that will cover them both until death, a single life annuity only covers one individual. Although, often the unpaid balance of the annuity will pass to the spouse or children upon death of the principal.
The main reason why someone would buy a single life annuity is the larger monthly or quarterly payments. For example, if you are 65 years old, the single life annuity would be calculated based on your life expectancy only. However, if you are 65 and your wife is 58, the annuity would be calculated on her life expectancy alone. The monthly payment would be decreased dramatically.
Types of Single Life Annuities
There are two types of single life annuities:
Deferred Single Life Annuity:
A deferred annuity can be purchased as a single premium or you can add to your annuity with monthly or annual payments. Most people choose this type of annuity if they plan on using the income for retirement. This allows you to grow your nest egg today, to ensure you have a prosperous retirement. Payments will begin when you reach retirement or whenever you instruct the insurance company you wish to begin. The payments will be based solely on your life expectancy and calculated to include the interest you will be receiving on your unpaid balance.
Immediate Single Life Annuity:
This type of policy is generally purchased instead of a whole life insurance policy. It is usually purchased with a single premium payment and payments back to you begin immediately. Much like the deferred single life annuity, the monthly or quarterly payments are based on your life expectancy.
Single Life Annuity Taxes
The single life annuity is considered a retirement plan for most circumstances and is taxed as such. There is a 10% penalty for early withdrawals much like the typical 401k or pension. However, the penalty is only valid if you take distributions before retirement age.
Where to get a Single Life Annuity
For the most part, you can find this type of annuity at any major insurance company. The best bet is to carefully research whichever company you choose to go with to make sure they have an excellent credit rating, and to be on the safe side I would only trust a company you heard of. There are a million companies selling single life annuities, and they will all be listed with the credit agencies. Do not do business with a company with a poor rating or a company that is not listed under any circumstances.
You have worked hard for your money and you should take every possible precaution that your money is there when it’s time to retire. The only person you should trust is sitting in your chair right now. Always do your own research and do not rely on anyone. This is the only way to absolutely know for sure that you are getting a good deal and the company will be in business when it is time to collect on your single life annuity.
