How Annuity Rates are Calculated?

Considering investing in an annuity? You will join the thousands of other people who, each year, decide that investing in income stability for the years of their life when no such thing would be possible, is a smart financial move. For many people, an annuity is the best way to ensure they will continue to live comfortably well into their retirement.
 
In addition to knowing the basics of what an annuity is, learning how annuity rates are calculated can help you make up your mind with regards to whether or not this is a wise financial decision for you, too. Basically, when a person gets an annuity, they are depositing a sum of money and, later, when they need the money, they will receive payments in either fixed or variable amounts until they either die or their set term expires.
 
Now, because the money you deposit into an annuity is allowed to grow, it’s important to know how annuity rates are determined so that you can get a good idea as to whether or not the amount you’re likely to receive in the future will be adequate. When calculating annuity rates, the following are taken into consideration:
 
• The initial amount that you, the individual, decides to deposit.
 
• The annuity term is first determined either by a person’s life expectancy (based on their age, sex and health) or the period which they selected, otherwise known as a term certain annuity.
 
• The rate of return is that which is earned through low-risk investments made with your money, by the annuity provider.
 
• The time or frequency in which payments are made.
 
• Whether a fixed or variable payment type has been selected.
 
For more information on the amount you’re likely to receive from an annuity each month or period, contact a licensed representative.

All of these elements are considered when annuity rates are determined.