Private Annuity: What Is It and How Does It Work?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

A private annuity is a contract between two parties in which the annuitant agrees to pay the annuity issuer a fixed sum of money each year. In addition, the annuity issuer agrees to make periodic payments back to the annuitant for the rest of their life. This type of agreement can be used as a retirement savings vehicle or provide income during one’s lifetime. So how does it work? Keep reading to find out!

What Is A Private Annuity?

A private annuity is an agreement between two people. One person, called the annuitant, agrees to pay the other person, the annuity issuer, a set amount of money each year. The annuity issuer agrees to make periodic payments back to the annuitant for as long as they live. This type of agreement can be used as a retirement savings vehicle or provide income during someone’s lifetime.

Private Annuities

How Does A Private Annuity Work?

There are two types of private annuities: immediate and deferred.

  • With an immediate annuity, the payments from the annuity issuer start as soon as the contract is finalized.
  • With a deferred annuity, the payments from the annuity issuer are delayed until a later date, which is typically when the annuitant retires.

Private annuities can be structured in several different ways, but they are often either single-life or joint-life. Single-life contracts make payments only for as long as the annuitant lives, while joint-life contracts make payments for as long as either the annuitant or their spouse is alive.

Personal Annuity

How To Buy A Private Annuity

The first step is to find an annuity issuer. There are many different types of annuity issuers, so it’s essential to research and find one that best suits your needs.

Once you’ve found an issuer, you’ll need to provide them with some personal information such as your age, gender, and health history. This information will be used to calculate your life expectancy, which is an essential factor in determining the size of your payments.

Next, you’ll need to decide how much money you want to invest in the annuity. This can be a lump sum of cash, or it can be an amount that you contribute each year. The more money you put into the annuity, the higher your payments.

Once you have all of this information, you’ll need to sign a contract with the annuity issuer. This contract will outline all of the terms and conditions of your agreement, so you must read it carefully before signing. After the contract is signed, the money you’ve invested will be transferred to the annuity issuer, and your payments will begin.

What Is A Private Annuity

Next Steps

Private annuities can be a great way to provide yourself with income during retirement or your lifetime. They’re a perfect option if you want some guaranteed payments and don’t mind locking away your money for a while. If you’re interested in learning more about this type of investment, do your research and contact us. We would be happy to give you a quote and answer any questions you have. Thanks for reading!

Private Annuity

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Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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