• The Different Types of Annuities

    by  • February 22, 2014 • Pensions

    Being complex in nature, life insurance policies and annuities are two completely different subjects yet are both similar in goal and in principle. Although you can choose any type of annuity with ease, choosing the best options or terms may give you certain problems in the long run. To ensure the financial safety of yourself or your partner in the future, you must maximize all possible options or choices to achieve that goal. Annuities have different types of annuities, each created to serve a purpose for the different circumstances of each individual.

    Annuity products offered today differ in terms of three factors; first, how money is paid or saved into the annuity plan. Second, how income is received or withdrawn, and lastly, how the funds or the capital of the pension is invested. Here is a list of possible annuity products you can choose from depending on which best fits you and your needs. Single premium annuities works in where the investments are made all at once possibly through the use of a one lump sum method of payment.

    The minimal amount of investment usually ranges from $5k to $10k. Another type of annuity is the flexible premium annuity. As the name implies, the plan is started by funding through a sequence of payments. The first fee is usually low and allows anyone to start this type of annuity thus giving it its name of a flexible premium annuity plan. Another kind of annuity is immediate annuity plans which are favored by those who need an immediate source of income. As the name implies, immediate annuities pay right after the annuity has been provided a capital.

    It is usually bought by retirees with capitals they have saved up in preparation for retirement. Deferred annuities start to provide income several years after the annuity plan is purchased. You are given two options on how to withdraw your income which may be either by a one lump sum or by regular payments on a guaranteed and agreed upon period of time, usually monthly. Deferred annuities are utilized as investment carriers in the long run by retirees as well as non-retirees. They are used to fund tax-impeded insurance plans and tax-protected annuities.

    They may also be funded using a single or flexible premium annuity. Another kind of annuity is fixed annuities; where in the insurance firm places your funds into fixed profit investments like bonds. This type of annuity is the best option for investors with tolerance to low risks and a shorter termed investment time window. The improvement or growth that occurs will be significantly low. Investors of fixed annuity plans only benefit when the interest rates decrease, and not when they increase.

    The last type of annuity is variable annuities, which is considered to associate with it greater risks that that of a fixed annuity plan. This type of investment offers you the ability to choose how to control your savings among many different invested funds.

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