An annuity account is a special investment plan that allows you to collect your money just when you are retiring.There are many different types of annuities. They have plenty of pros and cons.
If saving for retirement or just a medium to long term plan, an annuity may be the correct choice for you. Learning about annuities is very important to help you better understand and choose your ideal product. The following will inform you of some of the basics regarding annuities:
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What is an annuity account
An annuity account in an investment contract between you and the company (usually an insurance company), where they pay you according to the terms of amount, date and increments. Annuity Leads are usually how agents will contact you. When it comes to this type of investment, your funds are placed with the investment organization, in a lump sum or in installments, as soon as your contract is signed. You will begin to get payments beginning on the determined date for a number of years or perpetually. An annuity count will likely be an integral part of your retirement plans.
Concerned individuals
The payor and owner of the contract, the annuitant, the beneficiary, and the insurance are all involved in an annuity contract. The insurance company is the one responsible for contracting the agreement and paying returns to the annuitant. The owner-payor supplies the funds to be invested with the insurance company. The annuitant is the recipient, and if he dies during the course of the contract, the beneficiary is the recipient. In most cases, the owner-payor is also the annuitant.
Types of Annuities
There are various kinds of annuities. Among the types of annuities you may be interested in include immediate, deferred, fixed, variable, fixed period, lifetime, or two-life annuities.
* Immediate and deferred. Annuities are categorized by when the payouts are provided. With immediate annuities, you pay the investment amount in a lump sum and start receiving returns the year after. With deferred annuities, you may receive returns in a lump sum or on an installment basis at a specified time. The number of years in between the payment and returns is called the accumulation period.
Variable as well as fixed. Variable and fixed are the two types of annuity. You receive fixed amount of returns every year during the stipulated period in the case of fixed annuities. On the contrary, variable annuities are those with returns that fluctuate depending on the performance of the investment vehicle.
* Fixed period and lifetime. Your annuity account can be for a fixed period or a lifetime as well. With a fixed period annuity you will get your returns within a specific amount of years. For instance, you may want an annuity account that pays you a specific amount of money each year beginning when you are 60 years old until you are 80 years old. This contract would indicate a fixed period of twenty years of payment. If something unexpected occurs before the term expires, your beneficiaries will get a certain amount until the contract is over. A lifetime annuity allows you to receive perpetual returns on your investment. If you pass away during the repayment period, your beneficiaries will not receive the specified amount.
* Two-life annuity applicable. In case of the so called two-life annuity, the spouse continues to receive the specified amount even after the death of the annuitant. This payment will be received until the spouse also dies.
The many advantages of Annuities
One of the great things about an annuity is that it provides continuous income for those who are planning for retirement and for those who have medium- to long-term plans. Taxes are also deferred with annuities, unlike other investments. You don't pay taxes until you are getting returns. As both savings and insurance are combined, it is wise to invest in annuities. You get to save money for future use while also being insured in case of death.
Disadvantages of Annuities
While annuities offer attractive benefits, they also have some drawbacks you might want to consider. Annuities don't give you a very good return on investment. Variable annuities offer variable returns, whereas regular annuities offer fixed or limited returns. Annuities aren't exactly elastic, since the money is not obtainable whenever you want. Should you decide to terminate the contract early, the amount you get could possibly be lower than what you invested and there are penalties, as well as taxes, to pay.
All investments have their benefits and drawbacks. Understanding your needs is important when choosing an investment. An annuity account may be the best for you if you think of long term needs and want sure returns.
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