Annuities
Annuities offer specific benefits.
Learn about the basic facts of annuities below:
Common Factors Across Different Types of Annuities
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An annuity is a contract between you and an insurance company
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Opened with funds that the insurance company will then invest
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During the savings or "accumulation" phase you are making payments into the annuity, although some can be opened with one lump sum
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Because of the insurance benefits of annuities there are associated fees
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Death protection options
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Living benefit protection options
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Payments distributed during the payout or "annuitization/income" phase
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Primarily designed as a retirement investment option
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Tax-deferred earnings
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Lifetime income options
Immediate Annuities
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Income distribution begins right away
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Single Premium Immediate Annuities (SPIA) payments begin right away after purchasing through a single premium
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You can set the "mode," or how often you will receive payments and for how long (your whole life, or for the next 30 years, etc.)
Fixed Annuities
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Similar to CDs in that the interest rate is set, yet in many cases these will pay higher interest rates
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Can be a deferred or an immediate annuity
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Set payouts can offer the convenience of predictability
Deferred Annuities
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This type of annuity contract delays payments until the investor elects to receive them
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Can be fixed or variable
Variable Annuities
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Variable annuities allow for more account fluctuation up or down
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Insurance company invests in mutual-fund type investments aka "sub-accounts"
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Since it is an annuity the insurance company ensures you cannot loose below a certain amount of the account value