Annuities... how exactly do they work?

@ahgong (10064)
Singapore
June 20, 2008 2:30am CST
Annuities... they are the talk of town of late after the Prime Minister announced that all those who are below 50 from 1 Jan onwards are made compulsory to buy annuities. This is a really new thing for me... and I seek to understand it a little more. Cos reading the papers, I cannot really fully comprehend how this is going to put more money in my pocket. How do annuities work exactly? For a person who is interested to get a payout of $400 a month at the age of 85, how much must a person who is currently under 50 pay to achieve that targeted income? How long must he pay this amount for before he can start drawing on the payouts? Is an annuity the same as some of the cash back programs offered by Prudential and Standard Chartered insurances? If this is so, what difference is the annuity when comparing with fixed deposits or insurance cash back? Any gurus out there can help?
1 response
@applefreak (3131)
• Singapore
20 Jun 08
i got to qualify that i'm in no way a guru. i read about these stuff a while back though. it seems like a savings with insurance thing. basically you dump a sum of money and withdraw it over the years. the insurance part comes in to ensure that you get your payout for the rest of your life. unlike a normal savings account, you will get the monthly payout even if you live to 150yo. as for how much the premium is, it depends on the insurance company and certain factors. i believe female has to pay more as they are known to live longer.
@ahgong (10064)
• Singapore
25 Jun 08
HMm... looks like I would have a lot of reading up to do. Guess it is about time to hook up with my agent on this.