Annuities: Retirement Vehicles That Need Careful Consideration
An annuity is a financial contract between an individual and an insurance company that is designed to be a source of retirement income. Under the contract the insurer agrees to make periodic payments to you, beginning either immediately or at some future date. Annuities have some distinct benefits. For example, with a deferred annuity you can put as much money as you want into the account and your earnings grow--tax deferred. An annuity may also provide dependable financial security in the form of a steady stream of income. The purpose of this article is to give you some basic information about Annuities that can help you sort out the complicated choices involved with these investments.
Please consult your tax advisor or accountant before making any investment decisions regarding the purchase of annuities.
The Two Basic Forms: Variable and Fixed
Two forms of annuities are available: Fixed and Variable. A Fixed Annuity earns a guaranteed rate of return for a specific period of time (per contract). When the period is over, a new rate is set. The FDIC does not back a Fixed Annuity; its security is tied to the financial strength of the insurance company that issues it. A Fixed Annuity is designed to provide a steady amount of income during a specified time period. The Annuity offers protection if you out-live your retirement savings.
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By MS Kauffman
