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Single Life Annuity
A single life annuity is an annuity that pays regular income to an individual after retirement. This type of annuity is sold by various insurance firms though agent networks. The insured individual is known as the annuitant. These annuities can make sense, particularly for the individual who is single or does not want to pass along annuity advantages to someone else. Married people may select either a single life annuity or a joint annuity. Those that select the joint and survivor option typically accept lower monthly payments while both parties are alive, in return for insurance against the risk that, when one spouse dies, the other will be left with insufficient income. A married person who chooses a single life annuity usually does so because his or her spouse has other financial resources or because the owner of the policy expects to outlive the spouse.
The most basic type of single life annuity is paid for with a lump sum of money and provides regular monthly payments for the lifetime of the annuitant. All payments end upon his death. However, a death benefit can be added if that suits the annuitants need better. He can also arrange for anything that remains of the initial investment at the time of his death to be refunded to his beneficiaries. Of course, these options are likely to reduce the monthly payment amount. A single life annuity can be useful as a way of insuring a stable stream of income for the lifetime of the individual who has purchased the annuity but there are drawbacks.
Single Life Annuity Drawbacks
No annuity is the best investment when your focus is leaving something to your heirs. Unlike other types of investments, there is no step up in basis. Your heirs will owe taxes that they might not owe if they were left a piece of real estate or money invested in a mutual fund. And as good as it sounds to have a reliable, steady income stream, there are times in life when you would be better off with a lump sum of cash to use when you want or need it. If this sounds like your situation you should understand that you can use your annuity to generate that cash by selling it.