Immediate Annuity or Deferred Annuity?
Annuities can be categorized as either immediate or deferred. An immediate annuity provides annuity income payments immediately after you make the initial annuity payment. A deferred annuity delays annuitization, which provides more time and opportunity for your money to grow tax deferred.
Fixed or variable?
There are two basic types of annuities: fixed or variable. In a fixed annuity, your cash value earns a fixed rate of return. Additionally, you are guaranteed a fixed payout when you begin to receive your annuity income. Variable annuities provide a variable rate of return, which will fluctuate up and down depending on the performance of the investment portfolio you select. A variable annuity offers more growth potential and investment choices than a fixed annuity, but also carries more risk.
Annuitization options
There are several ways to receive your annuity income payments:
A straight life annuity provides income until the annuitant dies.
An annuity certain annuity provides income for a fixed period of time, such as 10 or 20 years.
A variable life annuity provides variable income during the annuitant's lifetime.
A variable life with period certain annuity provides variable income during the annuitant's lifetime. If the annuitant dies before the designated certain period, the insurer will pay the contingent payee you have selected.
A life income with refund annuity provides income throughout the life of the annuitant. If the annuitant dies before receiving payments at least equal to the purchase price of the annuity, the insurer will pay a refund to the contingent payee you have selected.
A life annuity with period certain annuity provides income until the annuitant dies. If the annuitant dies before the designated certain period, the insurer will pay the balance to contingent payee you have selected.
A joint and survivor annuity provides income to two or more individuals until all of the individuals die.
Other annuity income options include a lump sum payout or systematic distributions.
Which type of annuity is right for me?
Each individual's retirement needs are as unique as the individual themself. That's why it is important to speak with a qualified financial advisor who can assess your unique situation: your plans for the future, your current financial status, etc. After evaluating your needs, you and your financial advisor can discuss the various investment options available.
|