Annuities are basically investments that promise you both fixed and variable payments over time. They are actually retirement plans wherein you fund through installments which in return give you back a specific sum every year for life or for a certain fixed number of years. As they help people to generate income during their retired life, so can be termed as pension plans, offering an income that you cannot outlive. They provide you sound solutions to cover up financial insecurities of old age.
Well, they are available in numbers in the present day market to make it easier for people to select the right annuity for them. But, in general you would only be presented with basic three choices when going for annuities:
* Payout Timing: In this kind of annuity, the investors get returns immediately after their investments in the same. This is most suitable for people who are looking for immediate income after investing. Generally, they differ from life insurance. This is because, an annuity never provides any kind of life insurance, but offers an investor guaranteed income for life or for a specific time frame.
* Kinds of Investment: There are basically two types of investment: fixed and variable. To discuss further, fixed annuities are being invested in high corporate bonds and government securities. Offering an assured rate, they offer a financial coverage over a period of twelve years. On the other hand, variable annuities include securities portfolios, money market securities, and fixed interest accounts. As they are tied to current market performance, so are modeled on the basis of corresponding managed investment.
* Liquidity: Mostly, annuities allow investors to withdraw up to 15 percent every year without any penalty. They usually come with surrender charge which is actually a penalty that is charged, if any investor withdraws the amount early.
There are some annuities that come with surrender charges, offering a bonus to the investors. These types have slightly longer surrender time frames or periods, and charge slightly higher fees as compared to any other standard annuity in the market. For investors who need to access their money immediately many annuities are available without charging any kind of surrender fees. They do not offer a bonus, but can charge slightly higher fee than any other standard annuity. They ensure 100% access to your money in return.
Apart from this, they provide additional benefits that can be considered as follows:
* They provide retirement savings to those people who are looking for safe and low risk options to invest their money.
* They turn the principal amount into a lifetime stream of income.
* They provide financial strength to the investors.
* They help investors meet their old age financial insecurities.
* They offer an income that you cannot outlive.
* They make a best choice to be independent even in an old age.
* They offer lump sum benefits to the investors during the annuitant’s life time.
* They offer money in a lump sum for hospitalization, major surgery, or even for housing investment.