Investors purchase their annuity product by paying a lump sum of money or a number of periodic payments to an insurance company. The insurance company then provides the individual with tax-free growth of their funds. The rate in a fixed account annuity can be guaranteed for a certain period of time.
The account value in a variable annuity will change depending on how well the portfolio performs. The annuity can only be invested in specific investment types and can change between fixed investments to common stock arrangements.
Then, beginning on a specified date, the individual may elect to receive regular income payments for the rest of his or her life.
The size of the payment is determined by the account value at the time of distribution, and the duration of the payment period. Life annuity payments will generally be smaller than would the equivalent fixed period payments.
Different policy options may enable you to have payments continue to your spouse, or to your children, or for a minimum number of years, regardless of who receives them after you die. Sometimes these options may impose higher fees to be assessed to the investment.
Interested individuals should carefully examine the variable annuity's prospectus to learn about any special account stipulations, rules, charges, or expenses that you may not be expecting. This information is provided before you commit to the contract, so you should spend sufficient time understanding all of the details that are unclear to you.
One of the beneficial features of an annuity contract is that the account funds are not taxable until they are withdrawn from the account. This allows you tax-deferred growth throughout the duration of the accumulation period.
The part of the annuity that is makes it an insurance product is partly due to the guaranteed monthly income payments for the duration of your life (or specified period). This can significantly lower the stress of allocating retirement income. Additionally, if you should happen to die before the contract expires; your heirs may be able to receive the remainder of the account up to the value of the premiums paid in.
There are a number of things that can reduce the value of your annuity contract. Items such as loans or early withdrawals may be correlated with additional charges or expenses that would normally not occur. Be sure that you sufficiently check with the prospectus to determine that you understand the implications of all of the contract details. - 31821
The account value in a variable annuity will change depending on how well the portfolio performs. The annuity can only be invested in specific investment types and can change between fixed investments to common stock arrangements.
Then, beginning on a specified date, the individual may elect to receive regular income payments for the rest of his or her life.
The size of the payment is determined by the account value at the time of distribution, and the duration of the payment period. Life annuity payments will generally be smaller than would the equivalent fixed period payments.
Different policy options may enable you to have payments continue to your spouse, or to your children, or for a minimum number of years, regardless of who receives them after you die. Sometimes these options may impose higher fees to be assessed to the investment.
Interested individuals should carefully examine the variable annuity's prospectus to learn about any special account stipulations, rules, charges, or expenses that you may not be expecting. This information is provided before you commit to the contract, so you should spend sufficient time understanding all of the details that are unclear to you.
One of the beneficial features of an annuity contract is that the account funds are not taxable until they are withdrawn from the account. This allows you tax-deferred growth throughout the duration of the accumulation period.
The part of the annuity that is makes it an insurance product is partly due to the guaranteed monthly income payments for the duration of your life (or specified period). This can significantly lower the stress of allocating retirement income. Additionally, if you should happen to die before the contract expires; your heirs may be able to receive the remainder of the account up to the value of the premiums paid in.
There are a number of things that can reduce the value of your annuity contract. Items such as loans or early withdrawals may be correlated with additional charges or expenses that would normally not occur. Be sure that you sufficiently check with the prospectus to determine that you understand the implications of all of the contract details. - 31821
About the Author:
The world of fixed rate annuities can be rather complicated. To get more details on this type of investment, be sure to visit Luke Murray at The Fixed Annuity Guide.
