Immediate Annuity aka Income Annuity: With immediate annuity, you will begin to receive payments shortly after you make your initial investment. For instance, you may consider purchasing an immediate annuity as you approach retirement age.
Deferred Annuity: A deferred annuity accumulates money, whereas the immediate annuity pays out. Deferred annuities can also be converted into immediate annuities when the owner decides to start collecting payments. Below are 3 types of deferred annuities:
Fixed Annuity: Insurance company makes fixed dollar payments for the term of the contract, usually until the annuitant dies. The insurance company guarantees both earnings and principal.
Variable Annuity: Variable annuities are long term investment vehicles designed to help investors save for retirement and involve certain contract limitations, fees, expenses and risks, including possible loss of the principal amount invested. The investment return and principal value may fluctuate so that the investment, when redeemed, may be worth more or less than original cost.
Indexed Annuity: Indexed Annuity is an insurance contract in which the return is based on the return of an underlying index. There is a cap to how much of the return will be received, as well as a floor that the return will not go below. There are fees and expenses that should be considered, as well as a sometimes considerable surrender charge.
*All guarantees are backed solely by the claims paying ability of the issuing insurance company.