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What are the Different Types of Annuities?

An annuity is simply income that one receives from an investment in the form of regular payments. They are a popular way of supporting the income of a retired person. Many different kinds of annuities exist, from fixed to variable to the deferred and lifetime. The following are a few of the most popular and common types of annuity.

In a fixed annuity, the company guarantees your principal as well as a minimum interest rate. The money that a person has in a fixed annuity will grow thanks to the interest and will not drop. The value of the annuity doesn't depend directly upon the investments made. State insurance departments are in charge of regulating the annuities.

In the realm of fixed annuities, there are market value adjusted annuities, which allow individuals to choose the period and interest rate, as well as offering the ability to take money from the annuity before the chosen time period ends. The equity-indexed annuity, also a fixed annuity, has a minimum interest rate and the value is determined by the performance of the investment.

The variable annuity is slightly different. The money is invested in a fund that is open to certain investors and the value of the annuity depends upon the performance of the investment. Those who want to invest in a variable annuity will find many different options available. These annuities undergo regulation by the Federal Securities and Exchange Commission as well as state insurance departments.

The above are the two main types of annuities. The subsequent annuities can be either fixed or variable.

An immediate annuity pays the income one period after the person buys the annuity. For example, if you have an annuity that pays you every three months, you will get the first payment three months after you purchase the annuity.

A deferred annuity doesn't begin paying out until a longer period has passed. In some cases, especially those who use this kind of annuity to supplement their retirement income, the payments won't begin for years, and in some cases decades.

A lifetime annuity will provide income for the remainder of your life. The amount of money that one receives over their life depends on a number of factors. First, it will depend on the amount one paid into the annuity. Second, it will depend on the age of the person. If it is a fixed annuity, it will also depend on the interest rate.

A fixed period annuity will only pay out for a predetermined amount of time. The money that one receives with a fixed annuity doesn't depend on age; however, it does depend on how much one paid into the annuity, as well as the length of time over which the payments will be made. If it is a fixed annuity, it will also depend on the interest rate.

You could also invest in a qualified annuity, which allows you to put the money into a retirement plan that is tax favored, such as an IRA. The money is not taxable for the year in which you paid it, so you will be able to save some money on taxes. A nonqualified annuity allows the earnings to be tax deferred until they area withdrawn.

The above are only a few of the different annuity types that one can find. Those who are nearing retirement age or who are concerned that they won't have enough savings to last them the remainder of their years should consider investing in an annuity. It can give you the cushion you need to remain financially secure.

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