Annuities Key Terms

Knowledge of annuities key terms helps consumers purchase the best products currently available

Retirees are often people who have worked hard for many years while looking forward to carefree years in the future. Annuities provide many benefits for these deserving people, yet the choices are myriad and possibly confusing. Fortunately, there are some excellent companies with a great menu of valuable products. Usually, these companies have talented, informative agents who will help the newcomer navigate the waters of strategic investment policies.

Annuities are very popular, but thoughtful planners should work with knowledgeable experts to find the perfect annuity. A clear understanding of the annuities key terms should facilitate decisions.

 

Annuity

An annuity is a financial product crafted to provide income for retirement. While daily reports show that the financial markets have their ups and downs, an annuity will not change with the volatility in the market, but it will protect an investor from some of the vicissitudes possibly faced by retirees and other investors. An insurance company with a team of smart people will invest the money that you put into an annuity, so the profits should be better than the profits realized by ordinary investors.
Try: All State Financial offers informative pages on annuities in general and the annuity products that are available.

Equity-indexed annuities

Equity-indexed annuities have special advantages. Savvy investors make and lose money in the stock market, which makes most people nervous about taking a risk by investing their money in stocks. Equity-indexed annuities provide an opportunity to invest in the stock market and minimize risk.
Try: Security and Exchange Commission has clear explanations on the advantages and disadvantages of equity-indexed annuities.

Variable annuity

Wise investment counselors usually advise an early start to retirement savings, and a variable annuity is a product that can be the perfect tool with which to accomplish this goal. The wise investment counselors will invest your funds in a variable annuity that can include a death benefit, deferment of taxes and a good return on the investment. A variable annuity contract might provide several choices, so speak with a trustworthy agent to help you make the best decisions.
Try: Prudential has clear explanations of the annuity options available to its clients.

Tax-deferred annuity

Although a tax-deferred annuity does not eliminate taxes, it delays the payment of some taxes until the taxpayer is retired and usually in a lower tax bracket. In the meantime, you have invested your money to earn interest.
Try: Most Choice provides details about investment options in clear, concise language for novices and experts alike.

Immediate annuity

Retirees might consider an immediate annuity, which will reduce some of their risk in a shaky economy and provide them with regular and guaranteed income. Each immediate annuity contract is different, so investors should read the contract carefully and work with an informative agent before committing. Immediate annuities are generally less risky than other types of annuities.
Try: The Lincoln Financial Group educates potential and current clients on its company website.

Lifetime annuity

Retirees with a lifetime annuity will have an income that they can depend on forever. That's the good news, but a lifetime annuity will not provide benefits for survivors in most cases. There are risks involved for a lifetime annuity because it ends with the death of the annuitant-which could be two months or 20 years after the annuity starts to pay.
Try: The Insurance Information Institute is educational and a great resource for those investigating investment products. You'll find explanations of lifetime annuities as well as other types.

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