Category:Annuities

Types of Annuities


 * Deferred Annuities are used to accumulate assets. Funds will grow at a rate that can be either fixed or variable.


 * Fixed Annuity The money you put in a fixed annuity earns interest at a rate that is guaranteed for a specific period of time—ranging from one to five years or more, depending on the terms of the contract. When that period ends, a new rate may take effect—or the old rate may be offered again.


 * Variable Annuity With a variable annuity, your money is put in subaccounts that are invested in stock and bond funds. The return on your investments is subject to the risk of market fluctuation. Your total account value depends on how much risk you take, the performance of the subaccounts, and what charges and fees are deducted.


 * Immediate (Income) Annuities are used to convert a lump sum into an income stream (regular payments). If the income stream is fixed, it is considered a fixed immediate annuity. Some fixed immediate annuities are offered with inflation-adjusted payments or graded payments that rise at a fixed rate, of for example, 3% annually. However, these options reduce the initial payment received but with the anticipation that payments will grow steadily over time. If the income stream is variable, it is considered a variable immediate annuity. Like deferred variable annuities, your money is put into subaccounts. These subaccounts can be invested in stock or bond funds. Payments will fluctuate based on the underlying subaccounts. With funds invested in stocks, it is possible that payments could grow at a rate higher than can be achieved by fixed immediate annuities.

Source:The Individual Annuity: A Resource in Your Retirement (pdf)

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