How Do Annuities Work? - September 15, 2008 -

Annuities are one of the most popular investment vehicles being used today to save a significant amount, to save while reducing your taxes or to ensure that you receive a steady flow of income. They are the ideal saving instruments of the twenty-first century.

When you buy an annuity, you end up signing a contract with an insurance company based on certain conditions. You either pay the insurance company a lump sum of money or you make small payments over a period of time. The money that you pay the insurance company keeps growing at a certain amount.

If rate at which your deposit grows is fixed, the annuity is a fixed annuity. However, if your money is invested in the stock market and the growth depends on the performance of the stock market then you have a variable annuity. Sometimes, your money is invested in the stock market but the insurance company assures you of a minimum level beyond which your gains will never fall, it is known as equity indexed annuity.

Based on your agreement with the insurance company, you will receive the value of your deposit at a future date along with the interest you have earned. You can get payment in the form of Term Certain Fixed annuity which is certain specified amounts at regular intervals for a certain time period. You get ask for specified amounts at regular intervals for the rest of your life. This is known as Fixed Life annuity. You can also ask the insurance company to pay you as soon as you deposit the entire amount of the annuity. This is known as Fixed Immediate annuity. Or, you can get paid at later date in the future as specified by you, and this is known as Fixed Deferred annuity.

The best way to choose the best annuity is to first figure out what you want and then try to match the benefits of different annuities to your need. This will help select the annuity that is best suited for your needs.

Check Out More Articles:

Nigeria Stock Market, Stock Market Malaysia, Pensions For Seniors

History Provides Tons of Annuity Sales Leads
Annuities have been with us for a very long time. Actually they date to the revolutionary times when Benjamin Franklin used annuities to help the Cities of Philadelphia and Boston provide funds for their citizenry. The last of these annuities lasted until 1991 when the City of Boston finally cashed it in. Benjamin Franklin did not invent ann...

What Are Annuities And Why Should I Buy One?
Annuities, as an investment option, are often seen as restrictive, unexciting and dull. You pay money in, sometimes over many years, and eventually you get paid an income from that money. This is the traditional view of a retirement annuity: its the way grandpa saved up enough to keep the wolf from the door after he stopped working. But there are o...

How Annuities Are Beneficial
Annuity is a type of contract between an individual and the insurance company to look after an individuals savings and his investment. It manages ones pension saving in such a way that once a person retires, there is ample amount of incoming income .It is also known as a pension plan as one of its useful features is to generate money in post retire...

Understanding Immediate Annuities and How They Work
An annuity is a written contract between you and a life insurance company in which the insurance company makes a series of regularly spaced payments to you in return for a premium or premiums you have paid. An annuity helps you accumulate money for future income needs but it is not a short term account. It should only be used for funds that need to...

Great Benefit for Annuity Owners - Nursing Home Waiver
Almost all newer annuity contracts have a provision in them to allow access to all or most of your funds in the event of a need for a nursing home. The greatest fear of most senior adults is being confined to a nursing home and not being able to live in dignity. Annuity products have a rider that allows for access to your funds to finance this need...

Annuities - Are They Missing From Your Portfolio?
Your portfolio may consist of a good mix of stocks, bonds, mutual funds perhaps real estate and hopefully life insurance and of course they all serve their purposes well. But which of these can provide a guaranteed income stream for retirement to supplement pension and /or social security?Annuities are solid retirement investment vehicles offered...

Term Life Insurance - And What Does "Annuitant" Mean?
In the insurance parlance, Annuitant is defined as a person who benefits from a pension or annuity. It can also be said to be a contract with an insurance company which is designed to give payments to the holder of the policy at specified intervals. The insurance payments are usually made after retirement.There are two types of annuities - fixed an...