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What is an annuity?

 

Anyone that has a large sum of money that is not good with managing it would greatly benefit from an immediate annuity. Aside from this security, it is the simplest of all the annuities that are available because you will not need to manage a portfolio.

But what is an annuity?
Annuities are a way of investing for the future that has been around for a long time.

Advantages of Immediate Annuity

Immediate annuity has several great benefits such as having the option of receiving payments for the rest of your life or only for a specific length of time. It provides you with a certain amount of income that you can depend on for the future and this is something that everyone needs.

Aside from this security, it is the simplest of all the annuities that are available because you will not need to manage a portfolio. It provides you with an immediate income right after the annuity is purchased and you can set it up to receive payments either monthly, four times a year, twice a year or yearly, it’s entirely up to you.

As with other annuities there are different forms of the immediate annuity for you to choose from. Talk to the annuity company of your choice to help you decide which one will be the best for you. Some of your choices include “joint and survivor annuities”, “Straight life annuity” and the option of having the payments made for a set period of time such as ten to twenty years.

Annuity Types: fixed immediate annuities, Variable Annuity, Equity-Based Annuity

In addition to deciding when you will receive your money from an annuity, you can also choose between a fixed and a variable annuity. A fixed annuity guarantees a minimum interest rate while your annuity accumulates, and guarantees equal check amounts when you withdraw from the annuity.

A variable annuity allows you different investment options for your funds, with a mutual fund as the most common choice. A variable annuity offers no guarantee to payout amounts, and your income from this annuity will fluctuate depending on the investment vehicle you chose. On occasion you may be offered an equity-based annuity which determines your interest rate based on an equity index such as the S&P 500.

Before you make a decision to choose the immediate annuity, you should talk to the annuity insurance company about other options such as the index annuity or the variable annuities that are available. You should also gather information about annuity rates and get a few annuity quotes to see who offers you the best deal.

 

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