An annuity is a written contract typically between you and a life insurance company in which the insurance company makes a series of regular secured payments to you in return for the premium or premiums you have paid. An annuity, however, is not a life insurance.
Annuities are financial instruments that earn interests and provide a guaranteed stream of payments over a predetermined amount of time. Annuities are long-term investments designed to meet retirement needs. Annuity is hereby a long-term financial vehicle that allows you to accumulate money that is tax-deferred for retirement.
Annuity is designed to help protect you from the risks of outliving your income. Annuities work by converting a lump-sum premium into a stream of income that a person can’t outlive. It helps transfer risk from the owner- annuitant to the insurance company.
TYPES OF ANNUTIY
1. Immediate Annuity (Fixed & Variable)
2. Deferred Annuity (Fixed & Variable)
An immediate annuity is the most basic type of annuity. You make one sum contribution. It’s converted into an ongoing, guaranteed stream of income for a specific period of time (as few as five years) or for a lifetime. Unlike a deferred annuity, an immediate annuity skips the accumulation phase and begins paying out income either immediately or within a year. A deferred annuity, on the other hand, is an insurance contract that generates income for retirement. In exchange for one-time or recurring deposits held for at least a year. An annuity company provides incremental repayments of your investment plus some certain amount of returns. Here, payout would be certain over a certain period of time.
Annuities offer streams of income, provide tax advantages, can grow with inflation, and has no contribution limits. In the event of death, annuities also offer riders that allow you to transfer your money to your beneficiaries. They allow you to suck away a large amount of cash without volatility.
Yeah! We’ve reached the end of our introductory discussion of annuity. Check our trending or featured posts to get more information on how to improve your financial life. If you have any question, forward them to wettmint@outlook.com . We’d be happy to meet your needs. We can also come up with arguable topics to clear mistakes or misconceptions. Thanks y’all for your support.
Post a Comment (0)