What Is An Annuity? How do Annuities Work? | Types of Annuities

Very Interesting and Useful Topic Regarding Annuity explained here. So read out our article to know What Is An Annuity? How do Annuities Work? and Types of Annuities and many more details about Annuity.

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Define Annuity:

“An Annuity is an insurance product that pays out income, and can be used as part of a retirement strategy. Annuities are a popular choice for investors who want to receive a steady income stream in retirement”.

In simple terms Annuity described as a financial tool for saving money. Most of the people use annuities to provide an income for retirement (or) to build savings. They can also provide money for your heirs.

What are the different types of annuities?

There are two basic types of annuities: They are

  • Deferred and
  • Immediate

Both deferred and immediate annuities offer some more types of products: called as

  • Fixed annuities
  • Index-linked annuities
  • Variable annuities

Deferred Annuity:

With a deferred annuity, your money is invested for a period of time until you are ready to begin taking withdrawals, typically in retirement.

Immediate Annuity:

If you opt for an immediate annuity you begin to receive payments soon after you make your initial investment.

Fixed Annuity:

With fixed annuities, the principal investment and earnings are both guaranteed and fixed payments are made for the term of the contract.

Fixed Indexed:

This special class of annuities yields returns on contributions based on a specified equity based index, such as the S&P 500.

Variable Annuities:

It allow you to choose between sub accounts that are similar to mutual funds. Your earnings potential is higher, but there is not a guaranteed return. Variable annuities are higher risk because there is a chance you could lose some or all of your money.

Benefits of Annuity

  • Tax-Deferred Growth
  • Competitive Fixed Interest Rates
  • Lifetime income stream, Regardless of How Long You Live, You Cannot Ever Outlive Your Money!
  • Protection Against Market Downturns, Your Funds are Guaranteed
  • Death Benefit Options
  • Access to Your Money

Annuities are best for long-term income, not short-term income. This is the best and highest way to see for yourself whether an annuity is right for you.

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