What Investment Types Are Available?
1. Fixed Annuities
Fixed annuities are invested primarily in high-grade corporate bonds and government securities. This type offers a guaranteed rate of return, usually in one to ten years.
A. Market Value Adjustment: The annuity works much like the Guaranteed Return Annuity, below, except there is no guarantee of funds if rates rise and you surrender your contract. Market Value Adjustment annuities work like a bond and often pay more than a Guaranteed Return Annuity due to the increased short-term risk of fluctuating rates.
B. The Guaranteed Return: This annuity is a fixed annuity that offers a guarantee that you will not receive less than 100% of your investment funds. There's no fluctuations in the interest rate and the market can deplete your initial investment should you surrender your contract.
2. Variable Annuities
Variable annuities enable you to invest in a specific funds, into sub-accounts. These sub-accounts are tied to the current market's rate.
- Money market
- guaranteed fixed accounts
- government bonds
- small cap markets funds
- mid cap markets funds
- large cap markets funds
- capital appreciation
- aggressive growth
- emerging markets funds
- growth markets funds
3. Bonus Annuities:
This annuity plan has penalties for early withdrawal but it will also give you a signing bonus up front of 3 to 5%. There are no loops or hoops to jump through to get your money out. The broker simply agrees to a reduced commission in return for you receiving the bonus. This annuity will need to mature for at least seven years.
Annuity Pay Out Timing:
The next thing to figure out is if you need an immediate or deferred annuity:
A. Deferred Annuities: In a deferred annuity, you receive payments starting at retirement. With a deferred annuity you can invest either a lump sum all at once, or make payments over a specified length of time. With Deferred annuities you can invest in either fixed or variable type accounts. These funds grow tax-deferred until youre ready to begin receiving funds. Deferred annuities are the most popular type in the US.
B. Immediate Annuities: In an immediate annuity, the investor begins to receive payments immediately upon investing funds. This is for investors that need immediate income from their annuity. You can also choose between a fixed payment that doesnt vary or a variable payment that is based on market performance.
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