What is an Ordinary Annuity and How Does it Work?

Shawn Plummer

CEO, The Annuity Expert

What Is An Ordinary Annuity?

An ordinary annuity is a financial product that regularly pays out a fixed sum. The payments can be made monthly, quarterly, yearly, or at other intervals. However, the payments are usually made for a set period, such as for 20 years or until the annuitant’s death.

Ordinary Annuity Vs Annuity Due

An Ordinary Annuity Can Be Defined As

An ordinary annuity is a financial product that provides regular payments over a set period. It is called an “ordinary” annuity to distinguish it from other annuities, such as deferred or variable.

An ordinary annuity can be funded in several ways, such as through a lump sum payment or a series of smaller payments made over time. The payments made into the annuity are then invested, and the annuity provides a regular income stream to the annuitant (the person receiving the payments). The income may be received monthly, quarterly, or annually, depending on the annuity terms.

One everyday use for an ordinary annuity is as a retirement savings vehicle. For example, an individual may purchase an annuity for a steady retirement income. Annuities can also be used for other purposes, such as providing a source of income for a child’s education or as a way to transfer wealth to future generations.

It’s important to note that annuities come with certain risks and potential drawbacks. For example, once you purchase an annuity, you may not be able to access your funds until the annuity starts making payments. Additionally, the value of an annuity can go up or down based on the performance of the investments held within the annuity.

An ordinary annuity can be a valuable financial tool for those seeking a steady income stream over a set period. However, it’s essential to carefully consider your financial goals and objectives and the annuity terms before deciding to purchase one.

Helpful Tool: ordinary annuity calculator

What Is Ordinary Annuity

How Does An Ordinary Annuity Work?

An ordinary annuity works by the holder making regular payments into the annuity. The annuity then regularly pays the holder a fixed sum of money. The payments can be made monthly, quarterly, yearly, or at other intervals. The payments are usually made for a set period, such as for 20 years or until the annuitant’s death.

What Is Regular Annuity

Ordinary Annuity Types

There are two types of ordinary annuities: immediate and deferred. Immediate annuities pay out payments to the holder immediately after making the first payment. Deferred annuities do not pay the holder until a future date, such as when the holder retires.

Ordinary Annuity

Next Steps

An ordinary annuity can be a great way to ensure that you have a regular income in retirement. It can also be used as a tool to help manage your taxes. If you are interested in purchasing an annuity, contact us today! We would be happy to help you find the perfect annuity for your needs.

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Shawn Plummer

CEO, The Annuity Expert

Shawn Plummer is a licensed financial professional, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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