In the current market, there are a number of different types of annuities that can be purchased as an investment. Annuities come with a variety of benefits and drawbacks, including how long they last, whether or not they can be converted into something else later on down the line, and whether or not they offer tax advantages. One type of annuity that has become popular lately is temporary annuities. Temporary annuities provide some level of security to investors by promising to give them their money back at some point in the future- however, this type offers tax disadvantages which makes it less than desirable for many people looking for an investment opportunity. In this guide, we will discuss what temporary annuities are all about so you can make the right decision for your retirement.
What is a Temporary Annuity?
A temporary annuity (also known as a period certain annuity) is an annuity that pays out a specific amount of money for a set length of time, or until the death of the annuitant, whichever comes first. It does not have to provide life contingencies.
The feature that temporary annuities set apart from other annuity payouts is that the earlier events will terminate all benefits.
If the annuitant died before the term of a temporary annuity was up, the assets would be paid to the beneficiary for the rest of the settlement option’s duration.