What is Pure Life Annuity and How Does it Work?

What is Pure Life Annuity and How Does it Work?

pure life annuity

A Pure Life Annuity refers to a financial tool. It is structured to cater to the needs of people who wish to have a regular flow of income up to their death. Pure Life Annuity is preferred by people who retire early in their lives. Pure Life Annuity is the best pick by many retirees because of its high coverage. There are enormous annuities out there that allow payment even after the death of the annuitant. A Pure Life Annuity provides income to the annuitant only under the condition that they are alive. When an individual who has a pure life annuity dies, payments stop, and no additional payments are made to any beneficiary or heir.

Usually, pure life Indemnities are sold by insurance companies. Also, they are considered as a measure of protection against the risk of living longer than one’s financial provision – the longevity risk. Such annuities are paid for by a single or series of payments after the insurance company pledges payment for as long as the insured must live to claim.

In this blog, we are going to explore more of the working of a Pure Life Annuity. Mainly its features and advantages. Like, is it safe to consider opting for retirement, and the usual queries regarding Pure Life Annuity. This guide is here to help you assess your financial objectives and if this product meets your needs.

Understanding the Basics of Pure Life Annuity

The Pure Life Annuity is a unique but effective investment instrument. It aims to facilitate lifelong income for anyone who acquires it. It does this by commencing periodic disbursements of cash to the annuitant. The cash is disbursed immediately or after some waiting time. It is considered a deferral period with respect to immediate or deferred annuities, respectively. Once bought, the annuity assures that income will be made available to the annuitant until death strikes, even if this is years into the future. This all begins with the individual making a one-time investment or series of investments.

If available, that money is then collected, invested, and earns interest on a tax-free basis during the accumulation phase. An important aspect of a Pure Life Annuity is that the payouts come to an end when the annuitant dies. Thus, the product is entirely dedicated to providing financial protection for the lifetime of the annuitant.

Key Features and Benefits of Pure Life Annuity

  • Income for Life: Pure Life Annuity allows the investor to look forward to receiving money at regular intervals. The annuitant can receive money irrespective of market conditions and the number of years one pays for the annuity.
  • Easier to Understand: Pure Life Annuities can be defined with ease, which makes them a practical choice. They are not like the synthesized annuities that have different types of payouts.
  • Better Regular Disbursements:  the regular disbursements of Pure Life Annuity are higher than most annuities.
  • Support Against Living Too Long: Pure Life Annuities make sure that you will not exhaust your funds. Therefore, this is a viable product for those who fear to die with their savings.

Is Pure Life Annuity a Smart Retirement Plan?

The response relies on your own financial circumstances as well as your retirement aspirations. However, for a sound financing and solid retirement plan check out the IUL book by Author Sean Kelly. Retirement plan is important so make sure you check out all the possibilities.

Following are a few aspects of a Pure Life Annuity to consider as you weigh its possible inclusion in your retirement plan:

Advantages of Pure Life Annuity:

  • Assured Income: Pure Life Annuity would be the best option if you want to plan a relaxing life ahead. This may be extremely helpful when you lack other sources of inflow that are guaranteed, like a pension.
  • Higher Payments: A Pure life annuity is helpful if your concern is mainly to increase the income received during your retirement.
  • Ease: Those who are looking for a retirement product that is less complex and offers benefits may find this type of annuity appealing.

Disadvantages of Pure Life Annuity:

  • Absolutely Nothing for Heirs: One of the most highlighted limitations of Pure Life Annuity is no benefits after death. For beneficiaries, there won’t be any perks to unlock. If someone plans to leave the inheritance and funds for loved ones behind, then Pure Life Annuity is a misfit.
  • Limitation of Inflation: In case of any recession or inflation hike, the value of money will remain intact. The value of your retirement funds or savings can drastically drop due to inflation.

FAQs

  1. How is a Pure Life Annuity better than other forms of annuities?

A Pure Life Annuity will pay the annuitant for as long as the individual is alive. However, after the annuitant’s death, no payouts will be made to any beneficiaries. 

  1. What if we surpass the given age in a Pure Life Annuity scheme?

A Pure Life Annuity is intended to payout over a lifetime. Regardless of how long it takes, the payments are made until the death of the insurant. The company, in this case, is responsible for the risk of your prolonged existence spanning numerous payments.

  1. Should I choose and pay for a Pure Life Annuity, or can I modify/cancel it after buying?

Generally, in resect to a Pure Life Annuity, most of the time people will have to accept that there is no getting out of the agreement meaning that after the beginning of the payments to the annuitant, the amount annuity can no longer be returned. One needs to make sure about his or her choice before ordering.

  1. What do early withdrawal policies mean for my investment in case of my premature death?

In the event that one dies a little more than a month after annuity commencement the available fund is forfeited to the insurance firm and no beneficiary is entitled to any pay outs. There is no possibility of inheritance which is good and a Conditional Lifetime Annuity does not supply. 

  1. Is Pure Life Annuity subject to taxes?

Of course, the income received shall also be considered as income and will Pure Life Annuity be subject to taxation. However, when a given person paid the annuity using after tax dollars, the taxable portion of that payment will only be the payment which will represent the interest.

Bottom Line

Pure Life Annuity is a financial tool that eliminates a user’s longevity risk by providing a fixed stream of income for the rest of the user’s life. It’s mostly preferred by retirees, if you want to learn more about securing wealth after retirement then give a read to money wealth life insurance books. Due to the higher payouts associated with the Pure Life Annuity as compared to other annuity types that have death benefits, it can be a better option for people who want to receive a lifetime income and do not care about leaving behind any money as an inheritance. Yet, the absence of any prospects of inheritance and the rigidity of this option are red flags that should not be ignored before arriving at a conclusion. In the end, it is important to consider an individual’s retirement conditions, financial objectives, and risks, which will also involve seeking advice on whether a Pure Life Annuity is a viable option.

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