Annuity Options

The promise of huge returns is what attracts many people to invest in annuities. Many consider it better than their usual savings due to the attractive return they will get from their money. People consider an annuity option as a smart investment since they will have a stable income stream by the time they retire. Annuities let you and an insurance company enter into a binding contract where you pay now and the company will give you periodic payments later. The amount of payment you will receive from an annuity depends on the length of time you have made the payment. You can then receive your payments monthly, quarterly, or yearly. While an annuity can be a very attractive retirement option, this plan may not be for everybody due to the high cost of maintaining one. Your insurance provider will invest your money in a diverse portfolio where it can grow safely, giving you higher returns. With the promise of a steady income flow in the future, it is important for you to know your annuity options. What’s good about annuity is that even if you have used part of it, or if you haven’t paid in full, your money keeps increasing. You can even keep the interest that would have been used to pay taxes and this helps increase your savings. If you plan to invest your money in an annuity, here are helpful tips that can help you in choosing the best annuity option for you:

Fixed Annuity

This annuity option can give you a sure rate for your investment return in a certain period of time.
A fixed annuity will convert your lump sum into regular income and help you avoid huge taxes.
Normally, investments on fixed annuities are those with low risks like government bonds, which are
not influenced by the inflation rate over the years. There are stricter rules in saving your money,
allowing you to withdraw for a certain period of time like 5-10 years. You can also be allowed to
withdraw only the interest or 10% of the total amount of your investment.

Immediate Annuity

This annuity option lets you buy an annuity contract in a single payment, where you can start
getting your investment back in 30 days. This is often called a Single Premium Immediate Annuity.
This is great for those who want to get immediate income or returns, and its rules are easier to
understand. The rate can be fixed or variable, depending on your contract. By the word itself, you
immediately qualify for benefits, instead of waiting for a number of years before you can enjoy your
savings. This is also great for those who plan to save late in their lives.

Variable Annuity

This annuity option has a potential for a greater return depending on where your money is
invested. When considering this annuity option, be very wary of financial planners who might end
up committing a serious fraud, specially if they use your money to invest in questionable stocks
and bonds. Many have been lured by a promise of greater returns when in fact, earnings from
variable annuities are not secured due to the ups and downs of the stock market. Always study
and compare before you sign that deal and check the history of your financial planner.

Life Annuity

This annuity option will pay you as long as you live. You can also have an option to buy this type
of annuity in one payment. Many life annuities carry great tax benefits and your money remain tax-
free until you withdraw them. Many use this to transfer large amount of money and avoid the
burden of yearly tax. You can have two payment options for this annuity, either an immediate
payment or a tax-deferred payment. If you choose this type, check with your financial planner on
what death benefits are included. Most annuities pass the benefits to your heirs, even if you die
before the contract expires. This annuity can be deducted from your income.

Deferred Annuity

This annuity option lets you postpone paying income taxes on your annuity earnings until you
withdraw them. This is good when you reach the age of retirement. By that time, you will be on a
lower income bracket, which means you will also have lower taxes, while enjoying greater earnings
from your annuity. Unlike an IRA, there is no federal tax law that stops you on how much you wish
to give. With this type of annuity, you can also give death benefits to your beneficiaries, just in
case you die prematurely. You can even protect your earnings by adding a living benefit on top of
this annuity option.

Equity Indexed Annuity

This annuity option is linked to an equity index or stock, and it earns interests based on that bond.
What makes it different from fixed annuities is that it gives you guaranteed returns over a period of
time without your annuity dropping below a specified amount. This means your income is safe,
where you gain from the rise of stocks, but never loses on its downfall. Not only will your savings
grow, but it also comes with a tax-deferred payment feature, which can all be passed on to your
heirs.
In the end, everyone will always dream of the most complete annuity option that has all the
benefits dreamed of. Whatever option you wish to take, always make sure that your investment is
secured, since annuities can mean a lifetime income for you and your loved ones. It is important to
list down your investment goals and consider how you will be paying for the annuity option of your
choice. There are plenty of resources on the web that can help you with your quest for greater
savings in the future. You can even try the annuity calculator at the Thrift Savings Plan website if
you are a civilian employed by the US Government, and calculate an estimate of your monthly
annuity. If you feel that you need more security than what your 401K plans and IRA can give, you
can always set your eyes for an annuity that makes your savings grow, tax-free. The fees can be
complex and asking a lot of questions will truly help.
RESOURCES:
Annuity Library. “ Annuities Options: An Overview. “

http://www.annuitylibrary.com/annuities_options.htm

CNN Money.com. “ Ultimate Guide to Retirement. “

http://money.cnn.com/retirement/guide/annuities_basics.moneymag/index.htm

MetLife. “ Annuities: Answering Your Questions About Annuities. “ 2003-2009.

http://www.metlife.com/individual/life-advice/retirement-planning/annuities/index.html

The Federal Retirement Thrift Investment Board. “ Annuity Calculator. “

http://www.tsp.gov/calc/annuity/annuity.cfm