Those who invest in annuities typically do so to ensure they have a continuous source of income. Investing in an annuity involves entering into a contract wherein the beneficiary receives periodic payments as a result of making a lump sum payment or a series of payments.
Essentially, an annuity is a contract between an issuer and yourself wherein you agree to invest principal, and in return you receive either fixed or variable payments over time. There is no cap on the amount you can invest in an annuity.
Annuities are not insurance policies, but they are issued by insurance companies. They are also not for everyone - but for the right investor, they can act as a valuable supplement to other retirement income products.
Annuities are available in a handful of different structures. You can fund your annuity in a lump sum or small investments over time. All of the capital invested in an annuity grows and compounds tax-deferred until the first withdrawal is made.
There are three types of annuities available for investment:
- Fixed - the insurance company agrees to pay the investor a fixed minimum rate of interest during your account's growth period, and that the period payments will be a specified amount per dollar in your account.
- Indexed - the investor receives a credit on a return that is based on changes in an index, and it is guaranteed by the insurance company that the contract value will be no less than a specified minimum regardless of index performance.
- Variable - the investor gets to select from a variety of investment options for the investment of his/her purchase payments, with the rate of return and periodic payments depending on the performance of those investment options.
To learn more about the different types of annuities on the market today, as well as other retirement products, obtain a free quote via our quote engine. One of our licensed agents will contact you at that point to provide guidance on selecting the products that will offer you the most support in your golden years.