Financial Resource

An annuity account is a special investment plan that allows you to collect your money just when you are retiring. An annuity may involve many different parties and come in different kinds. Just like other investment plans, they also have their share of advantages and disadvantages.

An annuity account may be the right investment move to make, if you are planning for your retirement or saving up for medium- to long-term plans. 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:

What does an annuity account consist of?

An annuity account is an investment contract between you and the investment company, generally it is an insurance company, wherein the latter periodically pays the annuitant a specific sum of money beginning at a particular period in time and for a specified span of time. Agents usually reach you through Annuity Leads. In this kind of investment, place your funds with the investment company, either in a lump sum or on an installment basis, as early as you sign your contract. You will begin to get payments beginning on the determined date for a number of years or perpetually. If you are planning for retirement, an annuity account may be beneficial for you.

Parties involved

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 responsible for contracting the agreement and paying returns to the annuitant as well. The owner-payor provides all the funds that is to be invested with the insurance company. The annuitant is the recipient of the returns, while the beneficiary receives the returns in case the annuitant passes away during the course of the contract or depending on the stipulation of the contract. The annuitant is almost always the owner.

Types of Annuities

There are different types of annuities. Among the types of annuities you may be interested in include immediate, deferred, fixed, variable, fixed period, lifetime, or two-life annuities.

*It can be deferred or it can be immediate. Annuities can be identified based on when the payouts are made. Immediate annuities require you to pay the investment in a lump sum, and you will begin receiving payments in the following years. The investment may be paid in a lump sum or installment, and the returns may come after a stated number of years with a deferred annuity. The accumulation period is the amount of years between the payment and the returns.

*Fixed and variable. Variable and fixed are the two types of annuity. The accounts which offer you a fixed sum of returns every year during the fixed currency of the deposit period are technically termed as fixed annuities. Variable annuities, on the other hand, are those with returns that fluctuate depending on the performance of the investment vehicle.

*Fixed period and lifetime. Your annuity account can also be for a fixed period or a lifetime. With a fixed period annuity, you will receive your returns within a stipulated number of years. For example, you may prefer an annuity account that lets you receive a certain amount of money every year starting at age 60 and continuing through age 80. This means your contract will last for 20 years Your beneficiaries will receive the specified amount until the contract ends, if the unfortunate happens before the term ends. A lifetime annuity allows you to receive perpetual returns on your investment. If your life ends during the repayment period, your beneficiaries will find themselves unable to attain the specified amount.

*Annuities For Two In case of the so called two-life annuity, the spouse continues to receive the specified amount even after the death of the annuitant. The spouse will receive a payment until passing away.

The many advantages of Annuities

Something great about an annuity is that it brings a constant salary for people who intend to retire and for people with medium to long term plans. Unlike other investments with annuities taxes are also deferred. You start paying taxes only when you start receiving your returns. As both savings and insurance are combined, it is wise to invest in annuities. For future use you get to save your money as well get insured in case of death.

Disadvantages of Annuities

Annuities may seem attractive, but there are some drawbacks you need to keep in mind. Annuities don’t give you a very good return on investment. Unlike other investment vehicles, annuities offer fixed or limited returns, unless you opt for variable annuities. You cannot get the money anytime you want as annuities are inflexible. 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.

Every investment has its advantages and disadvantages. Understanding your needs is important when choosing an investment. If you think your needs are long-term and if you want sure returns, then an annuity account may be the best choice for you.

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