When looking for investment options for the future, many people choose annuities. With many different types of annuity accounts available, it can be a daunting challenge. However, if you look at the five different types of annuity accounts individually, they suddenly begin making sense to the average investor.
Deferred Annuities are investments that pay out beginning at a certain period in time, paying a set amount yearly until death of both spouses typically. They are the most common type of annuity account one can invest in and have a long history of stability, even against the volatility of the stock market.
An Immediate Annuity is where you deposit a lump sum of money, and payments are begun from that fund at a certain point. One would typically use this type of annuity if they had won the lottery or had a large inheritance. They are more beneficial to someone near the age of retirement when they income has been generated.
Fixed Annuities have a set rate of return, typically below the market value, similar to a savings bond. The money is guaranteed to be paid in intervals, but the earnings aren't as high as in a deferred annuity.
Variable Annuities have allow for their rate of return to be tied to the stock market, raising and falling along with the trading cycle. They are typically the most risky of the annuity accounts available.
If you hear someone talk about an equity indexed annuity, they are speaking of an account that is a mixed combination of a fixed annuity and a variable annuity. A certain amount of the annuity is invested in the stock market, while the remaining portion is paid out at a guaranteed rate of return. This is for the investor who wants to hedge their bets, grow their money, but not wanting to risk it all playing the market.
After you learn all the different types of annuity accounts, you can look at your own retirement goals, time frame and options, as well as your financial situation, allowing you to make an informed decision regarding your retirement account.
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