When you go from monthly payments to yearly payments (to start the year), how much does this typically lower the payout rate of an immediate annuity? So, for example, if the annuity starts paying 10% (monthly) on a certain date, how much might the rate be lowered if someone wanted all of the money for the year on day one of the coming years? I'm sure that actuaries have a general knowledge of how this affects rates.
Monthly VS yearly income effecting rate?
- Thread starter MartinJ
- Start date
- 4,549
Depends on when you start the payments. If you start 1st payment now or in 1 year. Plus, only way you are getting 10% of the lump sum is if you either are 80 years old on life only payment or a fixed period payment of 11 or 12 years
- Thread starter
- #3
I speaking just about monthly payments versus yearly. Yes, I already know that pushing the start payment date back will raise the income rate. Let's say in 5 years a 60 year old wants income for the entire year on calendar day one instead of staggering those payments over 12 months. Repeat each year. I'm guessing that the rate might be lowered by half a percent. Example: 9% reduced to 8 1/2%.
- 10,313
Yes, monthly payments pay slightly more than annual. The exact percentage more depends on the carrier. Run an illustration and find out for the carrier of your choice.
- 5,770
The psychology of a monthly payment however often is the reason to lean that direction. Based on funds received, it also aids in budgeting.
Cash flow is always king in my mind, as well as in your client’s mind.
Cash flow is always king in my mind, as well as in your client’s mind.
