What is an Annuity? An annuity is a financial contract written by an insurance company that provides for a single future payment or for multiple periodic payments. There are various types of annuities.
Different Types of Annuities
Immediate Annuities – An annuity in which the annuity payout period begins immediately or within one year of the annuity purchase date.
Deferred Annuities – Deferred Annuity Payments begin at some future date.
Fixed Annuities – When you purchase a fixed annuity, the insurance company invests your funds and provides you with a specific guaranteed return (i.e. you can select a lump sum or periodic payments).
Variable Annuities – When you purchase a variable annuity, you generally get to decide how the money is invested, by choosing from a pre-selected list of funds. Accordingly, the returns will vary depending on the performance of the chosen investments.
Structured Settlement Annuities – Structured Settlement Annuities are purchased when a claimant agrees to resolve a lawsuit by receiving all or part of a settlement in the form of periodic payments on a pre-determined schedule, rather than as a lump sum. Once a structured settlement annuity is purchased, the insurance company that issues it is contractually bound to adhere to the original payment schedule.
Annuities : The Bottom Line
While annuities can provide reliable income for their recipients, annuities can also be rigid and they don’t evolve the way your financial needs do. Don’t let cash flow restrict you from improving your quality of life by paying off debt, buying a house, starting a business, or going back to school – especially, when it’s your money! Stop waiting and start living.