There is a lot of misconception about annuities. We are going to take some time to clear it up and give you general information on them.
An annuity is a lump sum of cash invested to produce a monthly stream of income for a fixed period or for life. The income can start now (immediate annuity) or in the future (deferred annuity). Funds are not protected or insured by the issuers.
The size of the future monthly check isn’t always a given – it depends if the annuity is fixed or variable.
Annuities come in all types and shapes.
This annuity will begin payments from a specific date. Usually these are purchased with payments or sometimes a single payment. These payments are typically made while the insured is working in order to receive payments during their retirement.
For a specified period of time or for the rest of your life, you can use an immediate annuity for regular payments. Immediate annuities are single payment annuities. A large sum of cash can be used for income for a specific time frame. These are not intended to offer liquidity or growth.
This annuity is used for retirement or savings for long term investors that want to have the stability of a fixed interest rate with no risk that they’ll every lose any of the principal. A fixed annuity will provide steady and guaranteed growth with the tax-deffered benefit
What is Indexed Annuity?
A fixed-indexed annuity is a type of annuity that grows at the greater of a) an annual, guaranteed minimum rate of return; or b) the return from a specified stock market index (such as the S&P 500), reduced by certain expenses and formulas.