There are several distinct annuities you can chose from. The differences tend to revolve around the method of payments and the system used to determine the payouts. The most basic type is the fixed annuity. A fixed annuity makes payouts at a fixed amount or increase or decrease on a fixed schedule. The annuities that are used in lottery winnings are an example of fixed annuities. Often, other large sum settlement annuities are also fixed.
The variable annuity is tied to some index. This index is often a financial instrument like a bond issue or mutual fund. With a variable annuity, there is a possibility of investment earnings. This would happen when the index goes up producing larger payouts. The advantage of the variable annuity is that these earnings are tax deferred. The tax due on them would not have to be paid until the payment has actually been made. Variable annuities also combine the best of both approaches to the handling of large sums of excess capital. They provide a regular income, but this income could be increased by successful investing.
Although the actual investment is done by the Company that issues the annuity, they normally establish several different sub-accounts based on different types of investments. The annuity holder has the option to move his funds from sub-account to sub-account without incurring any fees. This allows the annuity holder to maintain a certain degree of control over the investment choices. Since many people have a desire to keep some control of their financial fate firmly in their own hands, the variable annuity with several options is highly popular.
The various annuities have unique pay-in methods. With a single premium annuity, the entire amount is paid at once. After a certain period of time, the payouts begin. The capital amount could originate from many sources. It could have been a lottery winning or a personal injury settlement. A distribution from a retirement plan could be reinvested in an annuity. In some cases, the single sum simply represents excess investment capital. The annuity is an extremely valuable financial tool and can be utilized in many different situations.
It is also possible to purchase an annuity by making a series of payments to fund it. In some cases, there is a combination of a single premium payment and subsequent payments. The payments continue for a period of time and then the payouts begin. This type of annuity is often used in retirement and estate planning. It is especially useful for people who wish to invest more than the limits of their IRA plan allows. The different types of annuities allow a person to find one that suits his own particular financial circumstances. It is a good idea to have an Insurance specialist carefully explain the various options and make a recommendation of which type will be the most appropriate for your needs.
Read more annuity information at UFCAmerica.com.
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