If you’ve never dealt with annuities before, navigating the different types can be a confusing process. The best option for you depends on your income, age, health, risk tolerance, and long-term goals.
In this article, we explain the four different types of annuities as a guide to help you determine which type is the best option for your specific financial situation.
Immediate Annuities
When discussing how annuities work, one of the most popular types to consider is the immediate annuity. With this type, you will begin to receive your payments just as soon as you make that first initial investment. This is a popular option for people who are approaching retirement age because they can continue to receive income payments once they stop working and are no longer getting a paycheck.
Deferred Annuities
Another type of annuity available is the deferred annuity. With this type, your money accumulates and is held safely by an insurance company until you want or need to start receiving it. This type of annuity is nice for younger investors who don’t necessarily need the payments now but are planning ahead for their financial futures. If you establish a deferred annuity, you may be able to convert it into an immediate annuity if your circumstances change.
Fixed Annuities
If taking risks makes your anxiety levels skyrocket, then perhaps a fixed annuity is a good option for you. These types of annuities are fixed interest investments that pay you rates of interest that are guaranteed. You have the option of drawing money from fixed annuities immediately or deferring payments until a later date.
Variable Annuities
In contrast, variable annuities come with more risk, but also with more freedom to make smart financial choices. These are good annuities for financially savvy investors who can choose from sub-accounts and mutual funds. The benefit of variable annuities is that they offer the potential to earn a guaranteed income stream and perhaps capital appreciation as well. To take a bit of the sting out this risk, you can purchase a separate rider to lock in a steady stream of income no matter how the market performs.
Lump Sum Cash for Annuity
In conclusion, no matter which type of annuity you have, these are insurance contracts that provide periodic payments and the peace of mind that you will not outlive your income. Individuals who have annuities also have the option of receiving cash for annuity by selling their future payments for a lump sum if their financial needs change. Novation Settlement Solutions can help put money in your pocket when you need it most. Contact us to find out more.
*Novation is not a financial advisor or consultant and strongly recommends that you speak to a lawyer or accountant before making any significant financial decisions.
