A Primer on Retirement Annuity Types
A retirement annuity can be a great investment for the risk-averse retiree, as this insurance product provides guaranteed and steady income for the holder upon the completion of his or her payments into the annuity with very little possibility of investment loss associated with growth-oriented investments. Here is a guide to popular kinds of annuities and how they work.
Kinds of Annuities based on Investor Payment
Immediate annuities are best for investors who have a lot of disposable income at present, and are able to pay out a lump sum to ensure that they receive it as regular and stable income in the future. Money such as that received from a lottery win or inheritance from a will can be placed into an immediate annuity in the form of a single lump-sum payment. After the said payment has been made, your insurance provider will then give you monthly payouts at specific rates for a certain period of time like the rest of your life.
The average senior investor is more likely to buy into a deferred annuity which, as the name points out, provides the holder with payouts after a certain period of time or when he or she gives the provider payments that reach a specific amount.
Annuities based on Payout Structure
Fixed annuities provide guaranteed returns at specified rates over a set period as noted in the annuity agreement. For instance, an issuer may guarantee that you will receive 6% returns (inclusive of charges or taxes) on your investment once your payments have reached the overall amount of $150,000. These fixed-rate annuities are practical for investors with low tolerance for risk or simply want to avoid losses which can drag down their nest eggs.
Variable annuities are usually better for investors who want higher returns on their annuity investment. Instead of investing in mutual funds or similar tools, they can buy into variable annuities. While these come with lower guaranteed rates in comparison to fixed annuities, they are tied to other investments that can produce bigger profits in a favorable market.
Investors who pick an annuity based on their financial objectives, capabilities, and life expectancy can further extend the benefits they receive from it, making a good grasp of the concept of the annuity essential. To know which product is best for your retirement planning strategy, consult with a reputable insurance company that provides investments like the retirement annuity.
About the Author:
Katherine Smith is an author who specializes in financial topics concerning seniors. Puritan Financial Group provides seniors with retirement annuity information that can help them build bigger and stronger nest eggs. For more information on how Puritan Financial Group can help you, visit our website at http://www.puritanlife.com/products/annuities.
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