What Types of Annuities are Available?
When it comes to annuities you have to think ahead because, in most cases, you can’t reverse your decision. A financial expert can help you find the best strategy for your own situation. Please do NOT ask for advice from an annuity salesperson as he/she will explain why you need an annuity as they NEED the commission of the sale.
There are two basic kinds of annuities available in the market:
- Term Certain Annuities: This type of annuity pays you an income for a pre-determined period of time or up to age 90. If you die before your term is completed and received all your payments, the income is paid to a beneficiary, or to your estate.
- Life Annuities: A life annuity gives you a set monthly income for life. Payments will stop when you die and no money will go to your estate. You can change this if you add extra options to your agreement. For example, you can get a life annuity that makes payments to your spouse after your death. You can get an annuity that increases your income to keep up with rising prices.
Beside these two types of annuities there are different options you choose from when you’re buying an annuity.
Many people who buy life annuities add one or more of these options; you can change this if you add extra options to your agreement. For example, you can get a life annuity that makes payments to your spouse after your death. You can get an annuity that increases your income to keep up with rising prices. But with each extra option you choose, you get a lower monthly payment.
Annuity options and what they mean:
Joint-and-last-survivor option
This option appeals to couples. Payments continue as long as either you or your partner lives. Sometimes you can get higher monthly payments while both partners are alive. After one dies, the payments to the surviving partner go down. The thinking is that one person will need less income than two.
Guaranteed Number of Payments
This option guarantees a certain number of payments. For instance, let’s say you choose a 10-year guarantee. What happens if you die before the 10 years are up? Your loved ones or your estate will get the rest of your payments, or they may receive a lump sum of equal value. Of course, if you live past the guarantee period, you will still receive payments for life.
Indexed annuity
This option means your income goes up as prices rise. This is important because after five, 10, or 15 years, your monthly income will buy a lot less than it does today.
Some other annuity options available:
Installment Refund Annuity
Cash Refund Annuity
Variable Life Annuity
Prescribed Annuities
Structured Settlement Annuities
Deferred Annuities
Accrued Annuities
No wonder it’s the most complicated financial product. There are many different types and if you don’t understand WELL every little detail it could cost you a lot.
Although the idea of income for life sounds great, there is one huge pitfall that most annuity salesmen forget to mention. Once you annuitize your contract, the contract is frozen – your decision is final.
BEFORE you make a decision (and make sure is YOUR decision) on what kind of annuity are you going to choose please take a moment to understand What is an annuity? and The risks of an annuity what you should know!
Now let’s see some examples, and the different options you have as annuity alternatives to Protect Your Capital or check out Is the Bank Stealing Your Inheritance???
Related posts:
- What Is an Annuity?
- Annuity Risks and What You Should Know!
- Is the Bank Stealing Your Inheritance???
- Protect Your Capital!
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