Using an annuity for cash flow in retirement

An immediate annuity pays income immediately, as soon as it is purchased from the annuity issuer. These vehicles, called “payout annuities” or “income annuities”, can be used, for example, to generate a steady stream of income in retirement while transferring the burden of managing the money used to purchase them to the provider.

Payout annuity payments can take many forms. Examples include:

* Determined time. You could receive income for, say, seven years. Thereafter, no more payment will be made.

* Common life. Payments can be made to you or your spouse, as long as either of them is alive.

* Term life certain. There will be lifetime payments. In addition, there is a guarantee of, say, 10 years of payments, no matter what.

* Single life. This type of fixed annuity covers the life of an individual, without any guarantee. Payments can stop instantly, if the person dies immediately, or they can go on for decades.

If you want a lifetime income, a lifetime annuity will earn you the most money, but it will expire when you die, with nothing for your heirs.

Older payout annuity buyers can get more cash because they have a shorter life expectancy. In some cases, men will receive higher earnings than women of the same age because women tend to live longer. Other payout annuities use unisex tables.

Regardless of your age or gender, it is worth shopping for. Payout rates can vary widely from one annuity issuer to another, so doing your homework can dramatically increase your cash flow.

COLA January retirement package: 5.9% for the CSRS, 4.9% for the FERS

Average FEHB premiums in 2022 will increase by 3.8%

Leaving federal service due to a vaccination mandate? Think before acting

Work longer or have less in retirement

The MRA + 10 option under FERS

FERS Retirement Guide 2021