Annuitization Phase

  

The moment your annuities begin to pay out.

Example: You’ve just turned 65. Greyer, humbler, and crinklier than ever. You need money from the $100,000 fixed-rate annuity you purchased a decade ago. Pronto. Luckily, your annuity kicks into the annuitization phase and begins to deliver the green stuff.

Your annuitization pay-out calculator shows you that, based on six percent interest and a three percent inflation rate, your annuity pays you $1,102.24 on a monthly basis. Enjoy that used Winnebago. The living room with the hole in the wall has a great view of...stuff.

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Finance: What is Perpetuity?44 Views

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finance a la shmoop. what is a perpetuity? forever. that's what you should think

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when you hear the word perpetuity. well a perpetuity is a cousin to an annuity.

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in an annuity you invest a given amount of money and then you get a portion of [100 dollar bill]

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that dough paid out to you over a set number of years, or in the vein of a life

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insurance policy it gets paid out until you are you know doing backstroke Six

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Feet Under. and annuity sunsets well basically when you. do but a perpetuity [skeleton in the ground]

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outlives you. it pays forever even when you're dead. so why would anyone want one

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of these things? well they work for university scholarship endowments. you

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know like think about a great Italian literature philanthropist named well

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let's say Bella pepperoni. no offense to our Italian shmoopers out there. she made [woman wears name tag]

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her fortune analyzing the works of Dante and Machiavelli and wants to endow a

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scholarship for other PhDs in Italian Lit forever. well she'd put in say a

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million bucks and it might get invested in half and bonds half in stocks with

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yield and the throw from that million bucks might be something like a four or

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five percent a year or forty or fifty grand and that would be more than enough [equations on screen]

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to cover the basics for a PhD in Italian lit well more or less forever as

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dividends get raised in stocks bro and all that stuff. the million bucks just

01:23

remains invested 50/50 stocks and bonds and the world continues to spin so yeah

01:28

even when she's no longer around to enjoy the fruits of her labor as well [headstone shown]

01:31

that fruit doesn't spoil develop mold and start to smell bad even if we can't

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say the same for her. sorry. just keeping it real. [woman's picture next to casket.]

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that's perpetuity. goes forever. perpetual.

Up Next

Finance: What is Annuity?
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Technically, an annuity is any kind of regularly scheduled payment, usually made annually, quarterly or monthly...for the life of the recipient. Ev...

Find other enlightening terms in Shmoop Finance Genius Bar(f)