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Which Annuity Scheme is the Best?

When it comes to financial and investment products, there is no single answer to the question – which is the best product available? If there were a single product that worked well for everyone, other products simply would not exist. The fact that there are various kinds of annuities out there goes to show that which Annuity scheme will work best for you depends on your individual circumstances and what is most important to you.

The fact is that there are various annuities out there, each different from the other in some aspect or the other. The two main types of annuities are variable income annuities and fixed income annuities. As the title suggests, a fixed income annuity scheme pays a level, fixed income throughout the term of the annuity. A variable annuity, on the other hand, pays a variable income that is based on different factors depending on the type of the variable annuity.

If having a steady source of fixed income is important to you, a conventional level annuity scheme may work better for you than an annuity that is linked to an investment product such as stocks or shares. If you wish to protect your spending power and prevent your income from being eroded by future inflation levels, then an escalating or inflation linked annuity scheme might work well for you. On the other hand, if you require the maximum possible income from an annuity scheme right from the outset, then an escalating annuity scheme may not work well for you, since these type of annuities usually pay less than a conventional annuity would in the initial stages.

There are different bells and whistles that can be added to an annuity scheme, depending on the particular product and provider. For instance, you could add an extra feature that allows you to delay the annuity, or a feature that would allow your income payments to be made to your partner or beneficiaries for a certain period of time, even after you are gone.

So, when it comes to an annuity scheme, there is no single option that will work best for everyone. Everyone needs to find an annuity that will suit their specific needs. You can find the most suitable annuity by exploring the entire open market, and by comparing different products. If needed, you can also consult an independent financial advisor who can give you objective advice and help you make the right choice.

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Several consumers are now looking toward annuities to help them sustain their current lifestyle during their retirement years. Annuities, in their varied types, seem to work very well for most consumer and retirees. However, many consumers who have invested in annuities, or are planning to do so, can only budget for the future once they know what their Annuity Income will amount to on a regular basis. There are a number of calculators online that can help consumers to calculate their annuity income. There is also a series of 5 easy tips that every consumer can perform to determine the amount of their annuity income:

1. Determine the type of annuity. Annuities can come either variable or fixed. A fixed annuity will have a guaranteed payout. However, the income determined by a variable annuity will depend very substantially upon the performance of the applicable investment.  The annuity could also be deferred or immediate. A deferred annuity means that payments have been postponed until a designated point in time. An immediate annuity doles out payments as soon as the consumer has made their very first contribution.

2. Choose the payout option. For most consumers, the standard payout option is the full amount of annuity over a designated period of time, with any leftover balance being paid out to a beneficiary. However, there are several other payout options available with most annuities. They can be paid out to the annuity owner or the owner and their spouse. There are also payout options that can combine two or more versions of different payout options.

3. Determine other details. There are other details of the annuity that may impact payout. These include such things as interest rate and principal balance. Knowing these details can help determine the annuity income received.

4. Calculate payment amounts. The manual formula for determining the payment amounts is as follows:

Annuity Value = Payment Amount x Present Value of an Annuity Factor (PVOA)

5. Make Adjustments.  If the annuity is not scheduled to be paid out right away, adjustments will have to be made in calculating the annuity income.  The interest rate will accrue on the annuity between now and the first payment and the number of years until the consumer begins receiving payments.

Using these five simple steps can help determine exactly what annuity income can be expected. There are a variety of annuity calculators also online but manually, these steps seem to produce the easiest and most efficient way of determining expected annuity income.