Annuities have become increasingly popular and reliable in ensuring the financial security of individuals as they age and move in to their older phases of life. There are different annuities available and choosing the right annuity with the right provider can help to ensure a stable financial life during the years of retirement. With an economy that is often tumultuous and unpredictable, many individuals are seeking ways in which to ensure that their retirement years will be as free from financial worry as possible. For some, an impaired annuity offers the most lucrative and stable means to do so.
Annuities are offered by insurance companies and are financial products used to help secure financial stability in the years ahead. They can be purchased in a couple of different ways, either through a payment system or in one larger lump sum. At a later date, the annuity is dispersed through monthly payments to the annuitant directly.
There are several advantages to annuities, perhaps the biggest of which is that the money in the account is eligible for tax-deferment until the funds are withdrawn. This can be hugely impactful during retirement years in that most individuals make less money during retirement than during their working years, meaning that the tax break can be increasingly more beneficial after retirement.
Annuities are paid out on a monthly basis, most often until the death of the annuity’s owner. To ensure the appropriate timing of the annuity payments, an insurance actuary will estimate the life span of the annuity’s owner to determine the most appropriate payout each month. There are several different factors that are considered when the lifespan is predicted. One of these is the health condition of the annuity owner.
An impaired annuity becomes an option for those individuals who have a physical condition or health concern that can be expected to decrease their life expectancy. For those with a qualifying condition, more money from the annuity can be received on a monthly basis, since the term of the annuity is expected to be shortened. The qualifying conditions for an impaired annuity can vary but there are several that are very commonly seen by insurers. These include diabetes, heart disease and high blood pressure.
In the United Kingdom, annuity accounts are typically converted from retirement pensions. In order to qualify for an impaired annuity in the UK the expectation is that the annuity owner will not live for more than four or five years. The conditions most often accepted under an impaired annuity in the UK include cancer, stroke, heart disease and major organ failure. In the UK, impaired annuities can also sometimes be offered to residents in nursing homes. They may even be purchased rather quickly to ensure payment is prompt.
Advantages of Impaired Annuities
To qualify for an impaired annuity, the individual must have their medical history reviewed and confirmed. However, the advantages to qualifying for an impaired annuity can be tremendous. For those individuals that qualify, there is no way to verify that the years lived will be shorter than those individuals who do not qualify for the impaired annuity. That means that for those who qualify for the impaired annuity, the financial advantage can be quite beneficial if they live past the amount of years predicted given their health condition(s).
Most insurance estimates predict that an individual can receive approximately 30% more money with an impaired annuity than they would with a standard annuity.
Annuities present a way to safeguard financial security during retirement years. However, for those individuals who qualify for an impaired annuity, the increased income during what may be the last years of life can prove to be even more beneficial.
For those who qualify, the benefits of an impaired annuity far outlast those of a standard annuity.