Different types of deferred annuities and their benefits
By: Mike Anderson
Submitted: 2011-04-06 22:57:16 | Word Count: 532
Before we start our discussion on deferred annuities let me tell a bit details on what annuity actually is. In U.S by annuity, it means that you have to pay a lump sum of money as a single premium. This amount will be distributed to you at a later time along with the accumulated interest. Annuities generally provide a guaranteed income till a pre approved date or death whichever comes earlier. This income is tax free which makes annuities a great source of income for retired people. The financial details are regulated by individual states whereas variable annuities are supervised by 'Financial Industry Regulatory Authority (FINRA)'.
Annuity can be of 2 types mainly - Immediate Annuities and Deferred annuities. Immediate annuity is an annuity product which will yield return immediately. This is generally effective for people who are purchasing annuity product just before retirement. They will start to receive the return just after one month of purchasing the plan. On the other hand, deferred annuities got its name from the fact that the interest gained on these products is tax free until you choose to withdraw. You can receive the return as a lump sum or in monthly basis as per your own choice. Let us discuss some other details of Deferred Annuities.
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Deferred annuities plans have one common characteristic. The growth is not taxed until you withdraw and this feature is popularly known as tax-deferred growth. Again deferred annuities can be of 2 types. The type in which your investment increases just by the accumulation of the interest is known fixed deferred annuity. On the other hand the annuities in which you can involve stocks and bonds are known as variable annuity. It is obvious that variable annuities are more subject to market risk. This is why return is fixed in fixed deferred annuities but floating in variable deferred annuities. Another type of annuity is new in market which is known fixed indexed annuity. These types of Annuity have the features of both fixed and variable.
You can use effective annuity calculators to calculate the return of your annuity product. Such annuity calculators are available online in websites of companies offering annuities. With the help of an annuity calculator you can calculate the amount of return you will receive if you pay a certain amount of premium every month for a certain period of time or based on the return you desire you can calculate the amount of premium you would require to pay and for how long a time period too. After calculating the amount of return you need you can buy the policy that suits you and pay the premium accordingly.
You can collect information on all the different kinds of annuities from your agent or you can take the help of the Internet too. A well informed selection is always better then an ignorant one. Also consider the reputation and the background of the company you are buying the policy from so as to avoid any unwanted situations later.
