Early Payout for a Single Life Annuity Retirement Plan
A single life annuity retirement plan guarantees you a retirement income regardless of what happens to the savings from the money you paid to the insurance company. However, when you purchase a single life annuity from a deferred annuity or from an IRA, you must understand the proper procedure for taking early distributions.
Other People Are Reading
-
Process
-
To take an early distribution from your retirement plan, you must contact your retirement plan custodian (the financial institution that holds your funds) and request a distribution form. You must also tell the custodian you wish to make withdrawals under IRS rule 72t for deferred or single life annuities inside an IRA or 72q for deferred annuities that are not inside an IRA or any other retirement account and that will be converted to a single life annuity. If you make withdrawals that satisfy these rules, no IRS penalty will be imposed for early distributions (prior to age 59 1/2). If you are purchasing a single life annuity without the use of a deferred annuity or an IRA, there is no penalty regardless of your age.
Significance
-
When you take an early annuity payout, you receive a specific periodic payment amount for the rest of your life. Payments are based on your current age, your life expectancy and the amount of money you are converting to annuity payments. Money that has been converted to annuity payments cannot be retrieved for any reason. This money is permanently converted.
-
Benefit
-
The benefit of an early payout is that you receive retirement income for the rest of your life. You can retire earlier than you had planned and be assured of regular income. This is because a single life annuity makes payments to you until you die, regardless of how long you live.
Consideration
-
Before taking an early payout from a single life annuity, consider deferring the payment. An early payout will provide payments for your entire life, but the payments are higher it you wait to initiate the payments. The payment is based on your age when you first start payments, and when you're younger, you have a longer life expectancy. The insurer must be able to guarantee the payments, so the payment made to you is lower than if you had waited until your were older to begin receiving payment.
-
