Annuity

An annuity is a contract between an insurance company and you, an annuity owner. A typical annuity contract requires that the annuity owner pay a lump sum or make regular contributions (premiums) over a set amount of time to an insurance company. The lump sum payments can be made from your savings account, IRA funds, 401(k) money, or an inheritance. In return, the insurance company agrees to pay your money back later, plus any interest or earned income. These payments to the annuity owner are fixed payments over a set number of years, over the lifetime of an individual, or in some cases both.

Annuities are Attractive!

The most attractive feature of an annuity is that it is an excellent investment option, which provides a pension or a source of income for people during retirement. Annuities can either secure your retirement years or can provide you with an immediate source of income for as long as you desire. Basically, annuities give you a variety of income choices during retirement. The option of different income choices is dependent on the annuity plan.

Annuities can also allow you to withdraw some percentage of money from your annuity fund. This can be done every year without paying a surrender penalty; however, certain guidelines for this type of withdrawal should be followed in accordance to the type of annuity plan you chose.

In addition, some annuity plans provide a death benefit. In case you die before your income payments begin, the death benefit feature of the annuity plan allows your beneficiaries to receive equal to or more than the amount (lump sum or total premium payments) you paid when you purchased the annuity, minus any withdrawal or other fees.