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Sell Annuity Payment

Annuity is an insurance contract in the form of investment, and provides a source of income in the form of periodic payments during an agreed period for the annuity recipient (anuitan) or the heir, starting now or at some time in the future. This investment can be a great addition to a retirement portfolio, but it can be quite confusing. Understand how annuities and the possible income work to help plan for the future and adjust your other investments. The steps below will show you how to accurately calculate annuity payments and estimate future income.

1. Determine the Type of Annuity Owned

1. Determine your annuity payment type. Check your documents or contact the issuing company to see if your payment is immediate or not. If it is immediate, annuity payments will begin immediately after the initial investment. If you have a deferred fee, the investment payments will accumulate the regular interest rate.

2. Determine the type of investment in your annuity. your investments may be of a fixed or variable type. You can also check the type of investment by looking at the documents or contacting the company that issued the annuity. Fixed annuities have a guaranteed interest rate, and that is why payments are guaranteed. A variable annuity is highly dependent on the performance of the underlying investment, and therefore the amount paid is different each month. You choose the type of investment when buying an annuity. This annuity is an object of PPh 21

3. Know your liquidity options. Check the annuity contract or contact the annuity issuing company to find out your annuity liquidity options. You may be subject to penalties for withdrawing funds early. Some of these penalty annuities allow partial withdrawals of funds without penalty. There are also annuities that do not provide a penalty, such as no-surrender or load level annuities.

2. Determine Your Annuity Details

1. Know your annuity payment options. The most popular payment option is the payment of the full amount of the annuity over an agreed period, with all of the remaining balance after your death given to your beneficiary. Another option is payment until death in the absence of an heir, or payment for a specified period including payment to the beneficiary after the death of the collateral for a certain period of time. There are also annuity options that pay the heir for the duration of his life that exceeds yours. 


2. Find your principal balance. Your principal balance is the amount paid to purchase an annuity either in the form of an initial payment or monthly installments (for example from a salary). [6] If payments are made regularly, you should ask for the current balance amount to calculate your payment.

  • You will also receive an annuity statement statement. Your balance should be included in this report.


3. Find the interest rate. There may be a minimum guaranteed interest rate you will earn when buying an annuity. This means that your interest rate will never fall below that rate. [7] Otherwise, a fixed rate should be included in the documents received when purchasing the annuity, or if the annuity is variable, you can find out the guaranteed interest rate by contacting the annuity issuing company or checking your account online.

  • The annuity statement should also list your interest rate.

3. Calculate Your Payment

1. Calculate the payment amount based on your particular situation. For example, assume the price of an annuity of $ 65,000,000 with an interest rate of 4% will pay a fixed amount each year for the next 25 years. The formula for the value of the annuity = the number of payments x the present value of an annuity (PVOA). [8] The PVOA table is available here.
  • The PVOA factor for the above scenario is 15.62208. Therefore, 65,000,000,000 = Annual payment x 15.62208. As a result, the total annual payment was IDR 32,005,980.
  • You can also calculate the payment amount using the “PMT” function in Excel. The syntax is "= PMT (Interest Rate, Number of Periods, Current Value, Future Value)." In the example above, type "= PMT (0.04,25,6500000000,0)" into the cell and press "Enter." There are no spaces in this function. The result displayed is IDR 32,005,980.
2. Adjust the calculation if the annuity has not been paid out in several years. Find the future value of your principal balance using the Future Value table, [9] the interest rate that will be accrued on your annuity between now and when payments begin to be made, and the number of years until you start withdrawing payments. For example, assume that $ 65,000,000 you will receive 2% annual interest until it begins to be paid for 20 years. Multiply Rp.65,000,000,000 by 1.48595 (given the Future Value table) and you get 742,975. Future values ​​are generated using mathematical equations. You can see the table here.
  • Find future values ​​using FV function in Excel. The syntax is "= FV (Interest Rate, Amount, Added Payment, Current Value)." Enter "0" for additional payout variables.
  • Replace future value with the balance of the annuity and recalculate the payment using the formula "Annuity Value = Payment Amount x PVOA factor". Based on these variables, your annual payment is $ 47,559,290,000.

You can also adjust the annual payments to a more frequent frequency. To calculate the monthly payment, divide the interest rate by 12 and multiply the period by 12 before plugging the numbers into the formula.

Financial consultants agree that one should not rely on one source of income to support retirement. Diversification (distribution of sources of income) is very important in all investment portfolios.

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