The Basic Report on Annuities

Annuities is a financial investment product that is slowly gaining a higher level of popularity as time goes by. However, despite its growing popularity, a lot of people still don't know what it is and what it's about. This is rather unfortunate, especially since there are many different types of annuities and most of them are perfect for certain needs and retirement plans.

Annuities come in so many types, but the most common of them are fixed annuity, variable annuity, and equity indexed annuity. Starting with fixed annuity, this is a type of annuity where the policyholder will invest an amount of money, and the insurance company will release fixed amounts of payments to the policyholder on a regular basis. As opposed to that, a variable annuity is a type of annuity wherein the policyholder will invest a certain amount of money divided into different investment funds that altogether, builds an investment portfolio for the policyholder. The investor can put his money on stocks, bonds, and others. Lastly, the equity indexed annuity allows the investor to participate in indexes. Despite the movement of the indexes, the investor's principal is protected and there is a minimum guarantee of returns.

For each of those types of annuity, there are different options in terms of payout modes. For example, we have deferred annuity which pays out once in the future, at a date you specify. Compared to this, immediate annuity, as the term implies, begins paying out immediately after you buy the annuity contract. The total cash value of the annuity contract will automatically be divided so as to last your entire lifetime or throughout a specific period. Aside from those two major types, payout options can also vary when you buy joint life annuity, which pays out after the first annuitant dies, or a joint life and survivor annuity, which pays out after the second annuitant dies.

When it comes to paying your premiums, annuities also vary in two ways. First, you can pay your collective premiums in bulk through a single-premium annuity, which differs from an installment premium annuity wherein you are required to pay your annuity premiums in separate recurring payments. However, take note that immediate annuity is automatically a single-premium annuity, while deferred annuities can be under the installment premium payment option.

There are also some more things you should remember when buying and planning your annuity investment. Entering into an annuity contract is an investment, therefore you should plan this with the long-term situation in mind. Remember that you should enter an investment amount that you will not need, unless it is an immediate annuity. Otherwise, you might need to withdraw from your contract, which requires a 10% penalty if you are under 60. However, you can borrow from the accumulated earnings of your annuity investment. These earnings are tax-deferred, and as long as you pay out the loan, borrowing is completely safe and will not affect your death benefits at all. Any withdrawals, however, that will not be paid back will be deducted from the benefits your beneficiaries get.

Those are the very basics about annuities. If you are planning to get one, this will help you out a lot.