Single Life Annuity

Example

“Margaret chose a single life annuity for her retirement because it provided the highest monthly income, and she was comfortable that payments would end with her death since she had no dependents.”

Memory Tip

Think 'ONE life, ONE paycheck stops' - payments cover just one person and end when that person dies.

Why It Matters

Single life annuities provide the maximum retirement income per dollar invested, making them attractive for individuals without dependents who need to maximize their monthly cash flow. They eliminate longevity risk by guaranteeing income for life, regardless of how long you live.

Common Misconception

Some people think single life annuities are always the best choice because they offer higher payments, but they ignore the fact that payments cease at death with no survivor benefits. This makes them unsuitable for married couples or anyone wanting to leave money to heirs, despite the attractive payment amounts.

In Practice

Tom invests $400,000 in a single life annuity at age 65 and receives $2,100 monthly for life. If he had chosen a joint and survivor annuity with his wife, the payment would be $1,850 monthly but would continue for his wife after his death. Tom lives to age 85 and receives total payments of $504,000, earning back more than his initial investment while having guaranteed income throughout retirement.

Etymology

The concept dates back to ancient Rome where annua payments were made for life, with 'single life' designation emerging in modern insurance to distinguish from joint-life arrangements for couples.

Common Misspellings

Related Terms

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