Breakdown Of Different Types Of Annuities And How Each One Works

STARTING IN THE PRESENT INVESTING IN THE FUTURE A Breakdown of Different Types of ANNUITIES and How Each One Works Annuitization is the act of exchanging You make a single payment or a series of payments into your annuity and receive a guaranteed interest rate. the value of an annuity (or other lump sum investment) for a future income stream. You can start taking payments at age 59 ½, without additional tax FIXED ANNUITIES The income can last for a lifetime or a designated term, such as 10 years. penalties. Fixed interest intermediate expected holding period--similar to Certificates of Deposit (CDs). with an When you're ready to start taking тoney from your аппuity, you can choose from a variety of ways to receive your раутents. Tax Deferred Buildup - You don't pay any income tax on the buildup accrued in your annuity until you make withdrawals; but, gains are taxed at ordinary income tax rates, instead of capital gains rates. TL. Different Payment Options - You can decide to receive II guaranteed income for a specific term (i.e. 10 years), for as long as you live, or even for the length of someone else's life. The payments can Fixed annuities are considered to be safe investments, since the principal be monthly, quarterly, is guaranteed by the issuing insurance comрапу and also, up to a limit, by state insurance guaranty funds. semi-annually, or annually. This may be better or worse than a taxable account, depending on your tax bracket. Indexed annuities Indexed annuities are a type of fixed annuity where the interest rate is determined by a market index. This type of annuity is generally considered to be a INDEXED ANNUITIES normally provide the purchaser with different options for interest crediting. conservative place to invest your retirement money. Variable interest rate with a long expected holding period. Interest rate is usually pegged Similar to variable annuities, to a stock market index. indexed annuities also have surrender charges. These charges vary from 20% - 1% and different policies can have surrender charge periods ranging from 1-16 years; but, a common range for the surrender period length is 10-13 years. Indexed annuities are retirement savings vehicles, often considered to have relatively low risk and return. They are generally not meant for short term savings. A variable annuity is a Variable annuities are typically sold as investment vehicles that can offer large tax savings by deferring income taxes on your investment gain. Your deposits are taken out after taxes and you pay no taxes on the investment interest, dividends, or even the capital gains, until withdrawals are made. With this type of annuity, gains are taxed at ordinary income tax rates, instead of capital gains rates. contract with an insurance company with which you place your money and then choose how that money will be invested. You choose Stock and bond mutual fund investments in an insurance your investments from a list of funds, which can range wrapper. from very aggressive stock funds to more conservative bond funds. VARIABLE ANNUITIES In addition to stock and bond subaccounts, the Variable annuities also have a Death Benefit; so, if you die before the insurer has started making payments to you, the specified beneficiary is guaranteed to receive a certain amount. The buyer also has the option to put up to 100% of the funds in a fixed interest rate account, similar to a fixed rate annuity. This may be better or worse than a taxable account depending on your tax bracket. amount received is usually the amount of your investment premiums. Annuity Death Benefit Rider – This rider guarantees that if the annuity holder dies before the annuity payout begins, the beneficiary will be paid the cash value or the total of premiums paid, depending on which is higher. RIDERS Annuity Living Benefit Rider - Living benefit riders give three options: the first ensures the annuity holder will receive all of what they put into it. The second guarantees a minimum interest rate or Both indexed and variable higher, and the last guarantees income payments for some period of time. annuities can have add-on benefits called riders, which offer guaranteed income, return of principal, long-term care insurance, or "life insurance like" benefits. Income Riders - Annuity income riders include guaranteed withdrawal benefits, as well as guaranteed Some annuity benefits are included in the basic contract, while others are lifetime income benefits. optional and come with additional expenses. UnderstandAnnuities.com UnderstandAnnuities.com is your Guide to the Complex World of Annuities.