Term certain annuities are annuities that are paid over a pre-decided period of time. Annuities are contract bought with a specific amount of money which is then given back to the annuity holder over a certain amount of time.
A term certain annuity is often called as fixed period annuity. These are basically annuity contracts which are paid back over a certain period. This period of time is decided on purchase of the contract. The annuity holder renders a designated amount of money to be paid out over that decided period of time. If the annuity holder dies during a term certain annuity, then the remaining of that annuity purchase is normally given to his or her beneficiaries.
A term certain annuity pays varying amount of money which depends on the amount of money was used to buy that annuity. If a smaller amount of money was used to buy a term certain annuity, then every payment returned to the annuity holder will be smaller. If a larger amount of money was used, the payments then will be large.
Reasons for Buying Term Certain Annuities
Because of there is a chance that the annuity holder may outlive his or her term certain annuity, there are some reasons why an annuitant may select this kind of annuity. An individual is recommended to consult a financial professional before buying such type of annuity. Nevertheless, there are few reasons why an individual may opt to buy a term certain annuity:
- For the wealthy people who like to defer tax on their income for certain amount of time, term certain annuities may be sometimes an option for them.
- As a substitute to investments and mutual funds for a shorter period of time after the retirement
- People that are waiting for other retirement benefit plans to start and are in need of income coverage during that period of time.