Deferred Annuities

Expert Advise On Deferred Annuities

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Types Of Deferred Annuities

Regardless of whether you are 30 or 50, you should start thinking of the methods you can use to reap all the benefits of your retirement without worrying about the financial part. The sooner you start acquiring information, the better it will be for you in the future. Knowing exactly what is it that you will do and how things will develop for you when the time comes.

Deferred annuities have a basic mechanism that is rather simple to understand. For a given amount of time, you make payments, as established in the contract. Then, when the time comes, you receive payments from your investments. Of course, this is the basic principle behind deferred annuities, but in reality they can get very complex and it is highly important that you try to understand everything about them, so that you can make the right decision for you and your needs.

The first type of deferred annuity is also the one that is the simplest to understand as well. The fixed annuity will allow you to receive fixed payments when you are eligible according to the contract. These types of annuities work very similarly with certificates of deposit, but there is one big difference to take into consideration: with fixed annuities, you do not have to pay taxes until you start receiving your payments (at which point, the annuities you receive will be considered the same as any other type of income).

The second type of deferred annuity is the variable one. This one is a bit more difficult to understand, but to some of you it may be the best choice. These annuities are quite similar to mutual funds. Basically, you own a group of sub-accounts and, according to the way they perform, you will receive your payments. Since you cannot predict exactly how they will perform, the payments you receive can vary a lot as well. However, you have a certain degree of control over the level of risk at which you want to take your investment.

In addition to these two major types of annuities, you will also encounter the equity-indexed annuities and the longevity annuities. The first ones are actually a combination between fixed and variable annuities. Basically, you will receive certain fixed payments (like in the case of the fixed annuity), but you can maximize them if you credit your account with a stock market index formula. While this type of annuities may be quite difficult to understand, it can also be beneficial for you if you do get to understand them properly. Another thing worth mentioning when it comes to these annuities is the fact that the surrender charges in their case are usually larger than in the case of the other annuities (and they can go up to 5 or 10 years).

Longevity annuities are rather simple to understand on the other hand. If at the age of 55 you make a deposit, the company with which you signed the contract will guarantee that they will make payments to you for as long as you live starting with a certain age (80, for instance).

Do get to know as much as possible about all the types of annuities out there. Information means power and since this is your future that you have to think of, do take your time and analyze everything from all points of view.