Annuities: The Shocking Truths Revealed
By Tony Bahu
Understanding Immediate Annuity and Deferred Annuity
Annuity is a financial contract that converts a sum of money into a drawn out series of payments so that clients can pace their use of income over time. The annuity buyer provides a lump sum or series of premiums to an insurance company that repays it back along with the potential appreciation over a set period of time. Annuities are either deferred or immediate. Deferred Annuity A deferred annuity can be funded either through a lump sum or through a series of smaller contributions over an accumulation period of at least 10 years, giving the premiums time to appreciate. Deferred annuity enables you to set aside funds today and earnings accumulate tax deferred on your investment. Deferred annuity is either fixed or variable. A fixed annuity is tied to the interest rates. They are a safe bet as there is no risk of loosing money due to the stock market fluctuations. On the other hand, variable annuity offers investors to diversify their premiums through a range of stock and bond mutual funds called subaccounts. Here, the earnings fluctuate with the stock market. Deferred annuity is a suitable preposition for you in the following conditions: · You have several years to retire. · You are interested in accumulating assets on a periodic basis. · You want to begin payments for your retirement or any other need at a later date. Immediate Annuity An immediate annuity enables the purchaser to purchase a contract for a lump sum and receive payments within a year. Immediate annuity is a suitable preposition for you in the following conditions: · You want to receive a guaranteed payment each month to supplement your income. · You want to receive payments from your initial investment immediately. · You want monthly payments from a lump sum. All annuities come with a price tag. Hence, it is advisable to search around and buy the annuity package that facilitates flexible financial planning for your retirement.
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