10 Facts About Lifetime annuity

Life annuity is an annuity, or series of payments at fixed intervals, paid while the purchaser is alive.

Phases of an Lifetime annuity can be combined in the fusion of a retirement savings and retirement payment plan: the annuitant makes regular contributions to the Lifetime annuity until a certain date and then receives regular payments from it until death.

Sometimes there is a life insurance component added so that if the annuitant dies before Lifetime annuity payments begin, a beneficiary gets either a lump sum or Lifetime annuity payments.

Money deposited in a variable Lifetime annuity grows on a tax-deferred basis, so that taxes on investment gains are not due until a withdrawal is made.

Pure life Lifetime annuity ceases to make payments on the death of the annuitant.

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Valuation of an Lifetime annuity is calculated as the actuarial present value of the Lifetime annuity, which is dependent on the probability of the annuitant living to each future payment period, as well as the interest rate and timing of future payments.

The Lifetime annuity starts making regular payments to the annuitant within a year.

Disadvantage of such an Lifetime annuity is that the election is irrevocable and, because of inflation, a guaranteed income for life is not the same thing as guaranteeing a comfortable income for life.

Examples of these types of Lifetime annuity, often referred to as a Compulsory Purchase Annuity, are conventional annuities, with profit annuities and unit linked, or "third way" annuities.

In Canada the most common type of Lifetime annuity is the life Lifetime annuity, which is normally purchased by persons at their retirement age with tax-sheltered funds or with savings funds.