A little review on factors determining the amount of monthly income

MR. WATSON: Does sex/gender make a difference in how much I am going to get?

STUDENTS: Yes.

MR. WATSON: Let's say I have a twin; she's a girl. Everything else is equal. Who is going to get the highest monthly amount?

STUDENTS: The man. Shorter life expectancy.

MR. WATSON: Because I have a life expectancy that is shorter than hers since women live longer. She has a life expectancy that's longer than mine. So she will be paid the same amount of money over a longer period of time; therefore, her monthly check will be smaller. But theoretically she will receive the same, theoretically.

MR. WATSON: Does age make a difference in how much I am going to get?

STUDENTS: Yes.

MR. WATSON: Age makes a difference because if you have a guy my age, 48, I have fewer years to live than a guy, say, 30 years old. So if everything else is equal, then my check will be higher per month. Does that make sense? Age makes a difference. Sex makes a difference.

MR. WATSON: Does the interest rate make a difference in how much I am going to get?

STUDENTS: Yes.

MR. WATSON: Of course it does. Does the amount of money in the bucket make a difference in how much I am going to get?

STUDENTS: Yes.

MR. WATSON: Do your payout options make a difference?

STUDENTS: Yes.

MR. WATSON: Exactly. Any questions? Yes, ma'am?

WOMAN: You mentioned earlier the rights of survivorship. Now let's say you pass away. It transfers to your spouse so she's still receiving it. If she was to pass away and there were remaining funds in the annuity, can that be transferred to any beneficiary?

MR. WATSON: Only if it's an installment or cash refund, yes. We would look for the secondary beneficiary, the one I named.  With those refund options, the insurance company pays out until the bucket is empty.  

MR. WATSON: Now, look. The joint annuities are the only type of annuities that pay until both people die. You agree with that?

STUDENTS: Yes.

MR. WATSON: The straight life income pays for my life. Do you agree? Then it stops. The life income with cash refund or life income with installment refund just pays the balance back if I die before my life expectancy. Does that make sense?

STUDENTS: Yes.

MR. WATSON: The life income with a 10-year period certain just pays for my life but it's guaranteed for 10 years should I die before 10 years. Do you agree?

STUDENTS: Yes.

MR. WATSON: Only the joint annuities -- joint and full survivor, join and two thirds, joint and one half -- only those pay until both people die. If I die- if it's a full survivor-she continues to get full amount for how long?

STUDENTS: Until she dies.

MR. WATSON: Until she dies. But she gets the full amount. If it's joint and two thirds, she will get two thirds of the amount we were receiving while we were both alive for how long?

STUDENTS: Until she dies.

MR. WATSON: Joint and one half, after I die she gets on half until she dies. Does that make sense?

STUDENTS: Yes.

MR. WATSON: There's no insurance with an annuity. If I die without ever annuitizing, the annuity is left to my beneficiary.  Let’s say it’s my wife.  So if I never annuitized and I die, she gets it, so she becomes the annuitant and then she can take withdrawals or annuitize with all the same options and same rules we just talked about.

STUDENT: My question is, if you put in $100,000, and let's say your situation changed, you wanted to do another one. Can you up it?

MR. WATSON: Yeah, you can keep putting money in, as long as you have not annuitized it. Or buy another annuity, whatever you want.

STUDENT: That's before you take anything out.

MR. WATSON: Yes.

STUDENT: Before you annuitize it.

MR. WATSON: Right.

STUDENT: When it is a joint annuity and both spouses die, if there's a balance-say you purchased $100,000. If you only received $50,000, nobody gets the payoff?

MR. WATSON: Gone. Kids get nothing. The only annuities that can have balances left to beneficiaries are installment or cash refund, or life with period certain if I die within the time-frame. That's why you don't put all your money in an annuity. Right? Great Questions!!!

STUDENT: Those figures you just came up with, you can put anything in a month?

MR. WATSON: Yes, the more money you have in an annuity, the more you are going to get.