A period certain annuity (AKA term certain ) is an annuity that lasts for a fixed number of years. It does not last your lifetime and really has no relation to your age or health. This arrangement is pretty simple. You pay the insurance company $100,000 today and buy a 10 year period certain annuity and they pay you $890 a month for 10 years.
I got the rates right out of the Annuity Shopper Buyers Guide April 2015 posted at ImmediateAnnuities.com
I also then used this calculator to estimate the equivalent interest rate you'd have to earn to equal the annuity payments.
Here is the table for a $100,000 premium :
| Period | Monthly | Total | % rate |
| 5 | $1,680 | $100,800 | 0.31% |
| 10 | $890 | $106,800 | 1.32% |
| 15 | $643 | $115,740 | 1.99% |
| 20 | $524 | $125,760 | 2.38% |
| 25 | $454 | $136,200 | 2.61% |
| 30 | $407 | $146,520 | 2.73% |
The rates are the average monthly payments and then I summed up the total that you'd get out.
Given the low rates they're quoting there for the shorter term annuities you should really NOT buy a 5 year annuity. You'd come out ahead just laddering CDs from Ally bank. You could spend out about $1707 a month if you just bought 4 laddered CDs of 1,2,3,4 years. I didn't do the math but I am guessing you can beat the 10 year annuity with CD ladders too. This assumes you don't have tax reasons that make the annuity preferable.
--
Posts
