Types of Annuities

A good savings scheme should offer investors flexibility, versatility, stability and a good rate of interest. Annuities rate well on all these factors. An annuity is a contract between an investor and an insurance company. It involves the payment of premium/premiums by the investor who is in return assured capital gains by the insurance company, for as long as it is solvent. Annuities are not just insurance policies but also tax-deferred retirement savings plans. There are many types of annuities that cater to the requirements of all investors. So whether one invests in them as a retirement plan or for the tax benefits annuities have something to offer to everyone who wants to save money and earn a good rate of interest on it. The different types of annuities includes the following:

Fixed Annuities

Fixed annuities offer investors a fixed rate of interest for a set period of time. The rate of interest may be revised after the guaranteed period is over. This type of annuity is ideal for the conservative investor who wants a safe way of saving his money without much risk. The premium for the fixed annuity may be a one-time payment or multiple contributions may be allowed. Fixed annuities also include equity-indexed annuities, which are valued on the basis of performance of a specific stock index but offer a minimum rate of interest. A market-value-adjusted annuity is based on changes in interest rates in the market but also offer a fixed interest rate and period. Furthermore they allow the investor to take out the money before the set time period.

Variable Annuities

Variable annuities offer a range of investments including stocks and bonds. The rate of interest in variable annuities is usually uncertain and the level of risk is much higher as compared to fixed annuities.

Immediate Annuities

This type of annuities offers the investor the option of receiving payments from the annuity soon after the premium is paid.

Deferred Annuities

Payment from deferred annuities occurs at a later date and this time period may be coinciding with one’s retirement. The deferred annuities are particularly useful for individuals who want to use their investments in deferred annuities for their retirement plan. Also for people who want to save money and defer tax for quite a while this is the perfect option.

Fixed Period Annuities

As the name suggests the fixed period annuity is for a predetermined time span after which payment from the annuity is made.

Life Annuities

This provides the individual a chance to receive income from the investment for the rest of their life. If the annuity is held jointly then in the event of the death of one partner the other will continue to receive regular income from the annuity.

Single Premium Annuities and Flexible Premium Annuities

The single premium annuity requires payment of one lump sum amount. It may be a deferred single premium annuity or an immediate single premium annuity. In contrast flexible premium annuities allows the investor to make regular contribution to the annuity.

The different types of annuities offer individuals a chance to invest money in accordance with their particular financial situation.

ˆ Top