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Chapter 16. Tax-Sheltered Annuities > Annuity Payout Options - Pg. 160

Tax-Sheltered Annuities 160 Avoid variable annuities that have so called "lifestyle" choices. These are usually listed as a conservative, a moderate, or an aggressive portfolio. You don't really know what they are invested in, and it's very hard to find out. Annuity Payout Options Well, you've stuck with it thus far, so let's make you a real expert on annuities. We're not promising that you'll be popular at parties, but you'll know enough to be dangerous. If you're thinking of pur- chasing an annuity or already own one, you'll need to give some thought to how you'll want that income stream to come to you in retirement. · Straight life annuity option--The insurance company will pay an income stream to one person for his or her lifetime, no matter how long he or she lives. The insurance company uses actuaries (backroom number crunchers who try to predict the future) and computer programs to forecast how long you'll live. Sometimes if you're lucky, you'll live longer than they predict and beat them at their own game. But if you should die earlier than the actuaries expect, the insurance company gets to keep the dollars in your account. So if you're choosing this option, you better have a life expectancy of 100. This option will pay out the highest monthly amount, but it's also the riskiest of the options in that you are gambling for all or nothing. Terms to Know