Types of Annuities: Which One Can Work for You?

An annuity is important to consider when thinking about retirement funds. It’s a great payout plan to have when you’re done putting in your time in the workforce. Here are a few types of valuable annuities and how you can benefit from utilizing them.

Fixed and Variable Annuities

Fixed annuities provide minimum guaranteed interest rates throughout their terms. These types of investments are usually in things like securities and bonds. They’re based on a declared interest rate, but these rates are not always the same. Variable annuities don’t always guarantee minimum rates. They can also be invested mostly in common stock, which also provides the investor with the opportunity to vote on corporate matters for that stock. Sometimes, you’ll be asked to pay a specific fee for this service, but it certainly won’t be a wasteful way to spend.

Immediate and Deferred Annuities

Immediate Annuities bypass the typical accumulation phase and convert the process into a lump sum of guaranteed payments. The best part? Definitely the fact that the tax exemption period is during payout of the immediate annuity. On the other hand, deferred annuity plans aren’t taxed until after the accumulation period. During the accumulation period, you’ll be investing your money to secure yourself financially post-workforce.

Unregistered and Registered Annuities

Unfortunately, unregistered annuities don’t cut tax-payers utilizing this type of annuity any breaks. BUT they are similar to savings plans and have no serious charges when surrendered. Registered annuities are specifically registered with tax authorities and are the most recognized type of annuity available.

Some Pros and Cons of Annuities

The Pros

The great thing about many annuity plans is that they are tax-free for a certain amount of time. You don’t have to pay taxes on them right away, which allows you to invest more money when you can.
Once your annuity reaches a certain point in its development, often when you might retire, you have a guaranteed lifetime income. This is a major help to keep you living comfortably once you’ve reached the point in your life during which you no longer have to go to that pesky job each day.

The Cons

It is possible that you may, for one reason or another, struggle financially at some point before retirement. Unfortunately, the majority of annuity plans do not allow you to remove any portion of the money you’ve invested over time.
Another negative concept is that once you retire, there’s a possibility that you might have to pay taxes on the annuities you’ve invested in. Though you’re getting your invested money back over time, you’re also paying to use that money.

An Interesting Note

Men’s annuity rates tend to be higher than women’s generally. Why? Women are typically expected to live a few years longer than men.

In utilizing annuities, you can be assured that you will have money available in addition to whatever retirement plan your company may offer you.