Finance is a complicated world, and there are lots of terms and words you’ll hear that you aren’t accustomed to, and one of the most important is the concept of annuity. This refers to a payment that’s being made regularly at a particular time, such as once a month every month, and it’s the primary way you’ll get access to your pension from the years of working once you’ve retired, so keep reading to find out more about this process. In this article we will delve into different types of Annuity.
Immediate Annuity
An immediate annuity is something that’s not seen as commonly as other forms of annuity, and it refers to a kind of payment that you’ll have to make as a lump sum rather than a series of investments over time. This means that you’ll be able to receive payment over a period of time of your choosing, whether it’s in a few years or just over a month, and, due to how it works, its uses are more limited than other forms of annuity. Still, it’s commonly used in trusts in cases where large sums left in the inheritances of children are left until they’re old enough to get them. You may have some success using them as an investment tool, too, or for managing the salaries of your employees.
Deferred Annuity
Deferred annuity is one of the best annuities for retirement income you’ll find on this list, and that’s because it looks a little bit like your typical retirement account planning since you’ll be paying a sum of money towards your annuity over time, such as over the years of working in a job, and this money could be invested or increased over time, which means, by the time you’re done, you’ll have a large sum of money that you paid towards this account over years, or even more money thanks to smart investments that your financial or estate planner did.
Variable Annuity
A variable annuity is the type of annuity many people are interested in for their retirement, and that’s because you’ll be able to invest the money that you’ve set aside for your retirement while you’re still working, and this means that you’ll slowly earn more and more money doing nothing, money which you can use to live more comfortably once your main source of income has finished. This type of annuity is great if you’re planning for retirement years in advance since you can live comfortably in retirement with the money you have saved up, and your investments will have enough time to give great results.
Fixed Annuity
A fixed annuity is the polar opposite of a variable annuity, and, as you might expect, you won’t be able to invest the money you save in this type of annuity, which means many who are planning on retirement years in advance don’t consider this a viable option. However, this annuity still pays a regular, fixed amount of money on a regular basis, which is good if you’re retiring soon without an account you’ve been building up for decades and if you want to leave money to someone in drops to provide a comfortable income for them without them being able to spend all of the money at once.
Indexed Annuity
An indexed annuity is different from all the other types in this list because the funds inside the annuity are tied to the stock and performance of a company, and if you have any experience with this type of annuity, it may be because the company you work at chose to tie their employees’ annuity with their stock. This means the more the company expands and the better it performs, the more benefit you’ll get, but, at the same time, you may be affected by a poorly performing company. Fortunately, there are usually protections in place to ensure that people’s retirement funds aren’t affected too much by economic downturns in indexed annuities.
Conclusion
Annuities are financial tools that have been developed to help people both get the income and the pay they deserve, as well as help institutions pay that money, as paying the bulk sum to thousands of retirees at once would bankrupt any company. They’re a blessing in disguise to many companies, and, since you’ll be getting most of your money through this method if you’re retiring soon, it pays to understand how this method of payment works, its different types, and what will work best for you.
(Disclaimer: This content is a partnered post. This material is provided as news and general information. It should not be construed as an endorsement of any investment service. The opinions expressed are the personal views and experience of the author, and no recommendation is made.)
