How Can We Help?
< Back
You are here:
Print

Annuity vs Amortizing

Posted
Last Updated On
ByTalerina

L1: Annuity vs AmortizingCan someone explain to be me difference between an annuity vs amortizing. I know the monthly payouts are different, but why? I am 55 and retired. Now I want to rollover my 401K into an IRA and begin taking monthly distributions. Does an annuity last 20 years and amortizing last 33 or what? And if my life expectancy is 28.6 years how can I get an annuity that only goes for 20 years? Help! 2002-01-25 23:46, By: Talerina, IP: [127.0.0.1]
L2: RE: Annuity vs AmortizingThe amortization method works like the repayment of a loan. If all assumptions are met, the balance will be zero at the end of the period.The annuity method introduces one additional factor: mortality. The calculation here is for a life annuity it will pay you as long as you live, but if die all payments stop. The insurance company takes the risk of a longer than anticipated life expectancy and you take the risk of dying too soon. These are two of the three allowable methods that may be used. Remember, each method is designed to provide substantially equal periodic payments over your remaining life expectancy. Can you use other payment schedules and calculations? Sure, but NOT if you want to avoid the 10% penalty tax.2002-01-26 04:54, By: Gfw, IP: [127.0.0.1]

Table of Contents