subject: Various Types And Benefits Of Purchasing Annuities [print this page] If you are new to the concept of annuities, this article will help you to understand the basics of annuities as good financial investments. Defining it in a general term, an annuity is a kind of financial vehicle that assures income for life in exchange for an investment input or series of contributions. Annuity plans exist in varied forms and each type of annuity plan has its own set of pros and cons. The types of annuity plans existing in the financial market can be broadly categorized as:
1) Fixed annuities Fixed annuities guarantee minimum interest rates and accumulate on an already acknowledged interest basis. These types of annuity plans have their funds invested primarily in securities and bonds.
2) Variable annuities Variable annuities operate in a mutual fund environment and as far as safety is concerned, these have a dubious track record. Often various charges are associated with variable annuities.
3) Immediate annuities Payouts are determined and offered on the basis of a single contribution. The level of payout is dependent on the annuity insurer and also depends on whether the immediate annuity is fixed or variable.
4) Deferred annuities In deferred annuity plans, the contributions are made over an accumulation phase. These contributions are tax exempted and the cash value at maturity would decide the payout and pension.
The benefits of annuity plans regardless of the type of annuity can be generally stated as:
Lifetime Income: Annuities offer guaranteed lifetime income regardless of the type of annuity and help you to cover the risks at times when you have outlived your lifetime savings.
Flexible Premium Contributions - there is no limit to how much you can invest in an annuity, whether it's a single contribution or a series of payments.
Tax Exemption Immediate annuities are tax exempted regardless of the amount of the pay out and thus support your financial goals.
Annuity Investments are Low-risk investments Fixed or variable annuity investment policies have lower risks as compared to any other financial investment plan since the invested funds are pooled and the investors portfolio is diversified.
by: Tony
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