Types of Annuities

Fixed Annuity

Fixed annuities are retirement contracts based on protection of the investment at a guaranteed minimum rate of interest.

The insurance company agrees to pay the annuitant no less than a specified amount of interest during the time the account is accumulating cash.  Periodic payments are made for a specific dollar amount .  These can be for a certain period (20 years) or an indefinite period of time (lifetime).

Variable Annuity

This is an investment opportunity that affords the insured to select investments in a range of options.  The return on the investment will be based on the performance of the investment options that have been selected... Mutual funds are most the most common investment in this type of annuity.  These types of annuities are regulated by the SEC.

Indexed Annuity

This type of annuity is is based on the return of an index such as the S&P 500.  They are contracts that assure that the contract value will be no less that the specified minimum.

Immediate Annuities

This type of annuity guarantees a lifetime income.  It can be purchased with one single-lump sum payment.  It is most popular with retirees.  The annuitant can receive income for life or a certain period of time.  The payments are based on the fixed rate and can be paid out by the month, quarter, and semi- annually or annually.

Non-qualified and Qualified Annuities

The non-qualified annuity is one that is purchased outside of a retirement plan such as an IRA or a 401K.

The qualified annuity is purchased within a retirement account such as an IRA or a 401k with certain tax benefits.

The annuity is a great investment if one is looking to increase tax-deferred earnings or one would like to receive a guaranteed income for life or a set period. The options vary and should be customized to meet the needs of the individual.