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In 2009, Ted purchased an annuity for $60,000. The annuity is to pay him $1,500 per month for the rest of his life. His life expectancy is 120 months. A). Ted is not required to recognize any income until he has collected 40 payments (40 $1,500 = $60,000).
What is an Annuity? An annuity is a financial product that straddles the fence between insurance and investment. With an annuity you exchange a sum of cash today â typically from your retirement nest egg right as you begin to retire â for consistent periodic payments in the future. How much that monthly payout is and how long it lasts depends greatly on the type of annuity purchased and lots of fine print.