An annuity is a retirement planning tool designed to protect against the risk of outliving one’s financial resources. Annuities are one of the few financial vehicles that allow your money to grow tax deferred. There are several annuity income options, including the choice to receive a steady stream of income throughout your lifetime or one lump sum payment if you choose to surrender the policy.
Immediate Annuity or Deferred Annuity
Annuities can be categorized as either an immediate annuity or deferred annuity. An immediate annuity provides income payments shortly after you make the initial annuity payment. A deferred annuity delays annuitization, which provides more time and opportunity for your money to grow tax deferred.
Fixed Annuity or Variable Annuity
There are two basic types of annuities: fixed annuities and variable annuities. In a fixed annuity, your cash value earns a current rate of interest, which will never go below a minimum guaranteed interest rate. Variable annuities provide a variable rate of return, which will fluctuate depending on the performance of the sub-account investment portfolios you select. A variable annuity offers more growth potential and investment choices than a fixed annuity, but also carries more risk. If you annnuitize a fixed or variable annuity, you are guaranteed a fixed payout when you begin to receive your annuity income.
Which type of annuity is right for me?
Every person has unique needs. That’s why it is important to speak with a professional annuity advisor who can assess your particular situation, including your plans for the future and your current financial status. After evaluating your needs, a recommendation for the appropriate annuity, if necessary, can be made.
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