Annuities Explained In An Easy To Understand Manner

Annuities Explained

An annuity is a contract in which an insurance company guarantees an interest rate and or makes a series of income payments at regular intervals, in return for premiums you have paid. The rates at which the annuity pays out are called the annuity rates. An annuity does not have to be used for income purposes but fixed annuities are often purchased for future retirement income.

An annuity is the only vehicle that can pay a guaranteed lifetime income and can last as long as you live or for a specific guaranteed period. An annuity is neither a life insurance nor a health insurance policy. It is not a savings account or a savings certificate. Fixed annuities are a method of investing money with the goal of making a return on your investment.

You have the option to invest in a fixed index annuity or a variable annuity. Fixed index annuities offer the benefit of an unlimited amount that you can receive for a return on your investment without any risk to any of the funds you have invested. Unlike fixed annuities, a variable annuity does not guarantee your principle. A deferred annuity does not start payout immediately. A Fixed index annuity is a safe way for people to make investments because they offer more security than most options and a high potential for a great rate of return.

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