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insurance annuitiesAnnuities are basically just an investment vehicle that is built up through a series of untaxed, equal payments that are made over a regulated timeframe. Annuities are generally sold through insurance providers and will be either classed as immediate annuities or deferred annuities/ variable annuities or fixed annuities. (There is a relatively large amount of confusion within the industry at the moment as to whether or not annuities can be classified as a form of insurance) Immediate annuities begin distribution after as little as a month has passed. People who purchase immediate annuities are generally retired or nearing retirement, and they are required to purchase the annuity using a single lumped sum. Deferred annuities differ from immediate annuities in that their distribution period will not begin for several years. Although you can purchase deferred annuities through a single, lumped sum payment, they are generally purchased through what is referred to as an accumulation period. During the accumulation period, the purchaser makes a series of equal payments that are spread out across some type of pre-determined timeframe. Variable annuities are the more expensive, risk-oriented option through which you maintain a sub-account that comes in the form of a mutual fund, stocks or bonds. A variable annuity DOES NOT guarantee growth, but can end up generating more funds than its more common, conservative fixed annuity counterpart. A fixed annuity DOES guarantee growth due to the fact that it doesn't offer any type of sub-account.All annuities are designed to produce a form of retirement income that is to be distributed following the policyholder's retirement when they will no longer be receiving any source of income. When it comes time to select a specific annuity, there are various ones from which to choose from. They are as follows:
To read more about retirement income, check out RETIREMENT INCOME |
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