Different Types of Annuities Explained by The Annuity Report 2011
Different Types of Annuities Explained
Immediate- you give a company a lump sum of cash now in exchange for an income stream over time. Fixed- Lump sum or premiums paid over time that accumulate, tax deferred, and at a fixed rate established annually by the issuing company. At some future point, principle and interest will be returned to the buyer or the accumulated value can be annuitized to turn the account into an income stream. Variable – Rather than the certainty of a fixed rate, the Variable Annuity offers a variable rate of return generated from sub-accounts, usually mutual funds and bonds, during your accumulation phase. The key here is that you are invested in the securities market and subject to the whims of an unstable asset. So, variable annuities don’t carry the same principle and growth guarantees that other types of annuities offer. Because variable annuities are securities products they are also regulated by the SEC and can only be sold by registered securities representatives. Fixed Index- This is basically a fixed annuity with a different method of crediting interest. The principle account balance is protected from downside loss and appreciation is based on the performance of an external market index.
Different Types of Annuities Explained