The Ins And Outs Of Variable and Fixed Annuities
An individual buys an annuity from an insurance company and pays a lump sum or a series of payments over time. In return, the insurance company guarantees that the funds will grow at a tax-free rate. The earnings rate may be guaranteed for a period of time in a fixed account annuity.
Variable annuities are unique because the account value can change with fluctuations in market investments and other market conditions. This type of annuity can only be invested in specific investment types such as fixed investments or common stock.
Starting at the date of the distribution, if the investor chose the life annuity options, they may be able to take distributions for the remainder of their life.
The size of the payment is determined by the account value at the time of distribution, and the duration of the payment period. Life annuity payments will generally be smaller than would the equivalent fixed period payments.
Different policy options may enable you to have payments continue to your spouse, or to your children, or for a minimum number of years, regardless of who receives them after you die. Sometimes these options may impose higher fees to be assessed to the investment.
It is important that you careful evaluate each of the different characteristics and expenses of a variable annuity account before you commit to investing. Your contract data will have this information and will inform you of anything that you need to know before investing. If something doesn't seem right with the contract, make sure that you have it sufficiently answered before you commit to purchase the annuity.
One of the beneficial features of an annuity contract is that the account funds are not taxable until they are withdrawn from the account. This allows you tax-deferred growth throughout the duration of the accumulation period.
The insurance component, of course, is the guaranteed regular monthly income payment for the rest of your life, reducing the worry of your retirement income budgeting. In addition, should you die before you begin receiving payments, your heirs are guaranteed to receive the full amount of the original principal.
It is important to understand that certain actions outside of the design of your account may result in penalties, additional charges, or penalties that can affect the account value. Be certain that you have read the prospectus thoroughly and understand the ins and outs of the annuity contract. You do not want to be caught unawares of certain provisions and chargebacks. - 23204
Variable annuities are unique because the account value can change with fluctuations in market investments and other market conditions. This type of annuity can only be invested in specific investment types such as fixed investments or common stock.
Starting at the date of the distribution, if the investor chose the life annuity options, they may be able to take distributions for the remainder of their life.
The size of the payment is determined by the account value at the time of distribution, and the duration of the payment period. Life annuity payments will generally be smaller than would the equivalent fixed period payments.
Different policy options may enable you to have payments continue to your spouse, or to your children, or for a minimum number of years, regardless of who receives them after you die. Sometimes these options may impose higher fees to be assessed to the investment.
It is important that you careful evaluate each of the different characteristics and expenses of a variable annuity account before you commit to investing. Your contract data will have this information and will inform you of anything that you need to know before investing. If something doesn't seem right with the contract, make sure that you have it sufficiently answered before you commit to purchase the annuity.
One of the beneficial features of an annuity contract is that the account funds are not taxable until they are withdrawn from the account. This allows you tax-deferred growth throughout the duration of the accumulation period.
The insurance component, of course, is the guaranteed regular monthly income payment for the rest of your life, reducing the worry of your retirement income budgeting. In addition, should you die before you begin receiving payments, your heirs are guaranteed to receive the full amount of the original principal.
It is important to understand that certain actions outside of the design of your account may result in penalties, additional charges, or penalties that can affect the account value. Be certain that you have read the prospectus thoroughly and understand the ins and outs of the annuity contract. You do not want to be caught unawares of certain provisions and chargebacks. - 23204
About the Author:
The world of fixed index annuities can be rather complicated. To get more details on this type of investment, be sure to visit Luke Murray at The Fixed Annuity Guide.
posted by X - Men @ 1:22 AM
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