If you are waiting to start your life annuity payments, it might be a good idea to decide on a fixed date to start so that you can avoid large losses.
The reason most people wait to commence life annuity payments is because they believe interest rates will increase and that rise will mean a bigger monthly income.
While in theory it might be correct, it is certainly not so in the real world. There are many factors to be considered both on the business side of an annuity and the personal side.
On the business side, there may be reduced demand for money due to business conditions and greater availability of capital for the insurance companies, leading to lesser rates.
But the greater damage in waiting for life annuity payments are on the personal side. While you are waiting, you are not taking advantage of blending your age with your capital to give yourself a far better return with a life annuity payment. And unless you are earning outstanding returns on your capital, this will cost you dearly.
And that is because everyone, agents and clients, avoid the topics of sickness and death. If you become seriously ill, you may have to give up control of your money anyway, so what was the point in waiting?
Or you may just become infirm. And as you don’t know when you’ll die, what is your plan to make up for the annuity payments you did not take? If you fail to take, for example, a annuity payments of $1000 monthly for 6 months, you must live long enough to make up that money from an increase in the payment.
But that could be a long, long time; just do the math. If you only get $50 more a month, you’ll need to live an extra 10 years.
