Financial Planning AnnuitiesHow Does an Annuity Work

This is financial planner Patrick Munro checking
in with you today about how does an annuity work? An annuity is, got several phases to
it. First we have the accumulation phase, where you put money into the instrument, or
vessel as we call it. So, if you have a vessel and you put money into it, that is going to
accumulate, in this case tax deferred. The government has set it up so that you don't
have to pay taxes up to age 70 and a half on the accumulation of that vehicle.

Then
of course, we have the distribution period. Once you're ready to take income from your
annuity you can turn on an income stream through an immediate annuity then your deferred annuity
becomes an immediate annuity over a period of ten years, twenty years, or for your entire
life. However if you choose a ten year, your check will be higher on a monthly basis, the
twenty year, it'll be mid range, and of course it's a lower amount if you choose it for a
lifetime payout. The benefit of the lifetime payout if you have genes in your family that
last a long time, you can end up receiving more money than the insurance company has
had on deposit.

So there's varied selections that you have there that's for your annuity.
This is Patrick Munro, financial adviser..