Many people may have heard of annuities in some form or fashion, but what many people are not aware of is that there are actually several different types of annuities available. There are four broad types available – immediate, fixed, variable and fixed index annuities. Understanding annuities can be complicated, not because they’re difficult to understand, but because there is so much conflicting information online that makes it difficult to determine if you’re receiving a sales pitch or educational information. With that in mind, we have created our Understanding Annuities section of our Annuity Learning Center to help you better understand the different types of annuities available.
What is an Annuity?
An annuity is a contract between you and an insurance company that has the potential to increase in value and generate a steady stream of income over an extended period of time. Annuities are often used as a tool to build retirement savings or to reach other long-term goals (like a child’s college fund). Annuities can be setup through either a lump-sum payment or through a series of contributions over a period of time. Depending on the type of annuity that you’ve purchased, contract details, including immediate or future payments, will be different.
How Do Annuities Work?
An annuity is an insurance product (contract) that you purchase with a lump sum of money, or through payments over time. Once purchased, depending on the contract terms, your annuity will pay you on a future date or over the course of several separate payment dates. Depending on your contract, your income from an annuity can be paid on a monthly, quarterly or annual basis.
Depending on the contract you’ve purchased, you can choose to receive payments for the remainder of your life, or for a set number of years. This payment amount will vary based on a number of factors, most importantly the length of your payment period.
Different Types of Annuities
There are several different types of Annuities that can be purchased, each one offering unique features and terms. Click the links below and learn more about the different types of annuities that are available to you.