Multi payment annuity is a type of annuity that was bought over a long period of time with many smaller and separate payments. Multi payment annuity is also called as a flexible premium annuity. It acts much like a retirement account; because payments in such annuities tend to be more flexible with standard maximums and minimums permitted during every cycle. Minimum payments are however decided by the annuity company from which the annuity was bought. It can range from $50 to a couple of hundred U.S. dollars.
Annuity contracts are contracts that an annuitant buys from an annuity company against a decided amount of money. Once the annuity contract is purchased, the company is accountable to pay back the sum of money over a certain period of time with calculated interests. Annuity payments to an individual can be made over a certain period of time or for the rest of the annuity holder's life. While annuities are bought over a period of time with smaller payments, these are called as multi-payment annuities.
Why Should Buy a Multi Payment Annuity
Maximum payment into an annuity differs based on the annuity company from which the annuity was bought. Beyond the needed yearly minimum, there is normally no set specific amount of money the annuitant should pay into a Multi payment annuity with every payment. Below some reasons for buying a Multi payment annuity are mentioned:
- Flexibility in the amount paid into an annuity per year
- Flexibility in the time between two payments
- Smaller payments are easier to tackle over a longer period of time
- Individuals are free to schedule payment or to make their payments on unscheduled basis
In certain cases, Multi payment annuity can be tax-deferred and works much like 401(k) plans or IRAs. Payments are tax-deferred till the annuity starts to payout to the annuitants. Similar to retirement accounts, there may be tax penalties to withdraw money from the annuity prior to the Multi payment annuity are matured as per the contract.