![]() ![]() Many annuity buyers are uncomfortable at this possibility, so they add a guaranteed period-essentially a fixed period annuity-to their lifetime annuity. With a “pure” lifetime annuity, the payments stop when the annuitant dies, even if that’s a very short time after they began. ![]() The amount that is paid depends on the age of the annuitant (or ages, if it’s a two-life annuity), the amount paid into the annuity, and (if it’s a fixed annuity) an interest rate that the insurance company believes it can support for the length of the expected pay-out period. No other type of financial product can promise to do this. A variation of lifetime annuities continues income until the second one of two annuitants dies. The amount that is paid doesn’t depend on the age (or continued life) of the person who buys the annuity the payments depend instead on the amount paid into the annuity, the length of the payout period, and (if it’s a fixed annuity) an interest rate that the insurance company believes it can support for the length of the pay-out period.Ī lifetime annuity provides income for the remaining life of a person (called the “annuitant”). fixed period annuitiesĪ fixed period annuity pays an income for a specified period of time, such as ten years. For example, if the income is monthly, the first payment comes one month after the immediate annuity is bought. The time period depends on how often the income is to be paid. ![]() ![]() The payout might be a very long time deferred annuities for retirement can remain in the deferred stage for decades.Īn immediate annuity is designed to pay an income one time-period after the immediate annuity is bought. immediate annuitiesĪ deferred annuity receives premiums and investment changes for payout at a later time. Other types of annuitiesĪll of the following types of annuities are available in fixed or variable forms. This withdrawal flexibility is achieved by adjusting the annuity’s value, up or down, to reflect the change in the interest rate “market” (that is, the general level of interest rates) from the start of the selected time period to the time of withdrawal. It credits a minimum rate of interest, just as a fixed annuity does, but its value is also based on the performance of a specified stock index-usually computed as a fraction of that index’s total return.Ī market-value-adjusted annuity is one that combines two desirable features-the ability to select and fix the time period and interest rate over which your annuity will grow, and the flexibility to withdraw money from the annuity before the end of the time period selected. Types of fixed annuitiesĪn equity-indexed annuity is a type of fixed annuity, but looks like a hybrid. Variable annuities are regulated by state insurance departments and the federal Securities and Exchange Commission. Most variable annuities are structured to offer investors many different fund alternatives. The fund has a particular investment objective, and the value of your money in a variable annuity-and the amount of money to be paid out to you-is determined by the investment performance (net of expenses) of that fund. Money in a variable annuity is invested in a fund-like a mutual fund but one open only to investors in the insurance company’s variable life insurance and variable annuities. Fixed annuities are regulated by state insurance departments. Some fixed annuities credit a higher interest rate than the minimum, via a policy dividend that may be declared by the company’s board of directors, if the company’s actual investment, expense and mortality experience is more favorable than was expected. The growth of the annuity’s value and/or the benefits paid does not depend directly or entirely on the performance of the investments the insurance company makes to support the annuity. The growth of the annuity’s value and/or the benefits paid may be fixed at a dollar amount or by an interest rate, or they may grow by a specified formula. In other words, as long as the insurance company is financially sound, the money you have in a fixed annuity will grow and will not drop in value. In a fixed annuity, the insurance company guarantees the principal and a minimum rate of interest. ![]()
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