Written by Sean Pollock

Wednesday, 07 July 2004 11:54

What is an Annuity?
Annuity provides you with guaranteed income in retirement until the end of your life and no matter how markets shift. By bying an annuity you essentially protect yourself against two risks:

outliving your retirement savings
losing your retirement savings due to

You can use annuity to:

efficiently accumulate retirement money and turn in into guaranteed payments for life
turn a pool of money into a guaranteed stream of income for life.

Like other retirement investment products, annuities can be tax-deferred. There are two types of tax-deferred annuities: fixed and variable.

Fixed Interest Deferred Annuities, where the money in your annuity earns a guaranteed fixed interest rate. Your money accumulates on a tax-deferred basis and is paid to you for as long as you live.

Variable Deferred Annuities, in which the insurance company agrees to pay out income at a later date. Interest rate on your account depends on investment performance, but cannot be lower than a minimum.

Customized options
In addition to basic benefits, you can choose from a variety of other benefits, that address your retirement income concerns.

Single or Joint Life Only Policy provides payments for the rest of your life, regardless of how long you live. This option provides the highest income for any given premium, but payments cease upon death. With joint option, payments only stop after both of you have died.

Single or Joint Life with Period Certain pays a lifetime income that lasts for either one or two lifetimes and guarantees a minimum number of years payments, even if you were to die before the end of that period of time.

Single or Joint Life with Cash Refund pays a lifetime income that lasts for either one or two lifetimes and guarantees that you and your beneficiaries will receive income benefits no less than the amount you paid for your policy.

Single or Joint Life with Percent of Premium Death Benefit pays a lifetime income for either one or two lives, and when you die, a percentage of your premium payment (25% or 50%) is paid to your beneficiaries in a single sum.