The Different Types Of Annuities

Shawn Plummer

CEO, The Annuity Expert

All Types Of Annuities

The following list contains all types of annuities in existence.

  1. Fixed Annuities: These offer a guaranteed interest rate and a fixed number of payments over a certain period. They are considered low-risk.
  2. Variable Annuities: The rate of return for these annuities can vary because they allow owners to choose investments that produce returns, potentially increasing the value of the annuity over time. However, they come with higher risks due to market volatility.
  3. Indexed Annuities: Also known as fixed-index annuities, these are a hybrid of fixed and variable annuities. The return is based on a specified equity-based index, such as the S&P 500.
  4. Immediate Annuities: Purchased with a single lump-sum payment, and in return, pay-outs begin immediately (within one year of purchase). They are often bought by retirees who want a steady income stream.
  5. Deferred Annuities: These start payments at a future date and can be funded with either a lump sum or a series of contributions. They allow the investment to grow before the withdrawals begin.
  6. Lifetime Annuities: These guarantee income for the lifetime of the annuitant, regardless of how long they live, reducing the risk of outliving one’s savings.
  7. Qualified Annuities: Funded with pre-tax dollars as part of a retirement plan, these annuities are subject to the rules of that plan and the IRS, including the same tax penalties for early withdrawal.
  8. Non-Qualified Annuities: These are bought with after-tax dollars and are not subject to the same IRS rules that apply to qualified annuities or retirement accounts, offering more flexibility in withdrawals and contributions.
  9. Single Premium Annuities: Purchased with a single, lump-sum payment. They can be immediate or deferred in terms of income payments.
  10. Flexible Premium Annuities: Allow for multiple contributions over time rather than a single, lump-sum payment.
  11. Joint Annuities: These provide income for the lives of two or more annuitants, typically spouses. Payments continue until the death of the last annuitant.
  12. Survivorship Annuities: Similar to joint annuities, they generally provide a survivor benefit, where payments continue to a beneficiary after the death of the annuitant.
  13. Split Annuities: These utilize a combination of immediate and deferred annuities to provide both immediate income and future income.
  14. Impaired Risk Annuities: Designed for individuals with severe health conditions, offering a higher income based on a potentially shorter life expectancy.
  15. Group Annuities: Contractual financial products provided by an insurance company for a group of individuals, often used in company pension plans.
  16. Structured Settlement Annuities: These are often used for legal settlements or lottery winnings, providing a stream of payments over time to help manage large amounts of money.
  17. Charitable Gift Annuities: Part charitable donation, part annuity. These provide a stream of income for life, and the remainder goes to the specified charity.
  18. Longevity Annuities: Also known as deferred income annuities (DIA), these start payments at a later age, helping to protect against outliving one’s money.
  19. Equity-Linked Annuities: These are a type of variable annuity where the performance of the annuity is tied to an equity market.
  20. Inflation-Indexed Annuities: These are similar to fixed annuities, but the periodic payouts increase with inflation as measured by indices like the Consumer Price Index (CPI). This feature helps to protect the purchasing power of the annuity payments.
  21. Secondary Market Annuities (SMAs): These are not a traditional type of annuity but rather previously owned annuities (or structured settlement annuities) that are sold to new owners at a discounted rate.
  22. Fixed-Term Annuities: These provide regular payments for a specified period, which is agreed upon at the beginning of the annuity contract. Unlike lifetime annuities, they don’t continue until the annuitant’s death.
  23. Cash Refund Annuities: These guarantee that if the annuitant dies before receiving payments equal to the total purchase price, the remaining amount will be paid out in a lump sum to the beneficiaries.
  24. Installment Refund Annuities: These are similar to cash refund annuities, but after the annuitant’s death, the remaining amount is paid out to beneficiaries in installments.
  25. Life with Period Certain Annuities: These guarantee payments for a certain period, even if the annuitant dies. If the annuitant lives beyond a period certain, the payments continue for life.
  26. Unit-Linked Annuities: These are a type of variable annuity where the value of the annuity purchase is linked to units in an investment fund, similar to mutual funds.
  27. Participating Annuities: These allow annuitants to participate in the profits of the insurance company through dividends or other profit-sharing mechanisms.
  28. Private Annuities: A private annuity is an agreement where an individual transfers property to another person in exchange for periodic payments for the rest of the annuitant’s life.
  29. Bonus Annuities: These come with a bonus credit added to your contract value based on a specified percentage of your premium.
  30. Market-Value Adjusted Annuities (MVA): A type of fixed annuity that returns a market-value adjustment, either positive or negative, if you make a withdrawal or surrender your annuity early.
  31. Spousal Continuation Annuities: These allow a surviving spouse to continue receiving annuity payments after the annuitant’s death under the same terms of the original contract.
  32. Tax-Sheltered Annuities (TSA) or 403(b) plans: These are retirement plans offering tax benefits for certain employees of public schools, tax-exempt organizations, and certain ministers.
  33. Qualified Longevity Annuity Contracts (QLACs): These are deferred income annuities with special rules that allow them to be funded from a qualified retirement plan or IRA, helping manage longevity risk.
  34. RILA Annuities: These offer downside protection against losses from market volatility while still providing potential upside growth. They can be either fixed or variable annuities.
  35. Life Insurance Annuity: This is a type of hybrid product that combines life insurance and annuities. It provides both a death benefit and an income stream during retirement.
  36. Hybrid Long-Term Care (LTC) Annuities: These combine long-term care insurance with an annuity, providing a death benefit and covering long-term care expenses if needed. They are designed to address the potentially high cost of long-term care in retirement.
  37. Retirement Annuities: These are specifically designed for retirement planning and offer a reliable, guaranteed lifetime income stream to supplement other sources of retirement income such as Social Security or pension plans.
  38. Pension Annuities: These are annuities purchased with funds from a pension plan, providing a steady stream of income during retirement. They can be structured in various ways to fit individual needs.
  39. Annuity Ladders: This is a strategy where multiple annuities are purchased at different times to help manage interest rate risk and provide flexibility for changing financial needs in retirement.
  40. Lottery Annuities: These are annuities that can be purchased with lottery winnings, providing a guaranteed stream of income over a specified period or for life.
  41. Two-Tiered Annuities: These are fixed indexed annuities that are deferred for a fixed period and then require annuitization for a fixed payment period.
  42. Multi-Year Guaranteed Annuities: These are fixed annuities that guarantee a specific interest rate for a chosen number of years, providing a predictable income stream.
  43. Qualified Joint and Survivor Annuities (QJSA): These annuities provide lifetime payments to the annuitant and their spouse, with the option to choose a survivor benefit percentage upon death.
  44. Medicaid-Compliant Annuities: These are annuities designed to protect assets from being counted towards Medicaid eligibility requirements, making them helpful in long-term care planning.
  45. Period-Certain Annuity: This annuity guarantees payments for a specified period, usually between 5 and 20 years. If the annuitant dies during the period, payments continue to beneficiaries.
  46. IRA annuities: Retirement funding options combine the tax advantages of an individual retirement account (IRA) with the income-generating potential of an annuity.
  47. Fixed income annuity: An insurance product providing a guaranteed steady income stream for a set period, often used for retirement.
  48. Income Annuities: Financial products that offer a guaranteed income, typically for retirement, in exchange for an upfront investment. Payments can be fixed or variable.
  49. Single-Life Annuities: This pure annuity covers one person, providing a steady income for the remainder of the individual’s life.
  50. Grantor retained annuity trust: An estate planning tool allowing the grantor to transfer assets while receiving fixed annuity payments for a specified term, potentially reducing taxes.
  51. Temporary Annuities: Annuities providing regular payments over a predetermined period, ceasing thereafter, regardless of the annuitant’s lifespan.
  52. Charitable Remainder Annuity Trusts: A trust generating a fixed annual income for beneficiaries, with the remainder eventually going to designated charities.
  53. Qualified Domestic Relations Order Annuity: An annuity divided during a divorce via a QDRO, ensuring each party receives a portion of the benefits.
  54. Return of Premium Annuities: These annuities allow an owner to cancel their contract at any time without a penalty and receive their original investment back.
  55. Hybrid Annuities: Financial products combining elements of fixed and variable annuities, offering a guaranteed return with the potential for additional earnings.

Immediate Annuities

An immediate annuity is akin to a paycheck for retirees. You make a single lump-sum payment, and in return, you start receiving regular income almost immediately. It’s ideal for those who’ve just entered retirement and seek a steady income stream.

Example: Imagine you’ve saved $500,000 over your working years. By purchasing an immediate annuity, you could start receiving a fixed monthly amount, say $2,500, for the rest of your life.

More In-Depth Reading: What is an immediate annuity?

Medicaid Annuities

These immediate annuities can be a strategic tool for those concerned about Medicaid eligibility. They convert assets into income, potentially helping individuals qualify for Medicaid while still receiving annuity payments.

What Are The Different Types Of Annuities?

Deferred Annuities

Unlike immediate annuities, deferred annuity products allow your money to grow tax-deferred for a period before you start receiving payments. Think of it as a savings account for your retirement, where you let your money accumulate and tap into it later.

Single-Premium Annuities

As the name suggests, you make a one-time payment in exchange for future income. It’s straightforward and eliminates the hassle of periodic contributions.

Flexible-Premium Annuities

Unlike single-premium annuities, these allow you to make contributions over time, offering flexibility in how and when you fund your annuity.

Fixed Annuities

Fixed annuities guarantee a specific interest rate on your investment. It’s a safe bet for those who prefer predictability over market-linked returns.

Example: If you invest in a fixed annuity offering a 3% annual return, a $100,000 investment will grow to $103,000 annually, irrespective of market fluctuations.

More In-Depth Reading: What is a fixed annuity?

Multi-Year Guaranteed Annuities (MYGA)

A subset of fixed annuities, MYGAs offer a guaranteed interest rate for a set number of years. They’re a perfect fit for individuals looking for a short to medium-term investment with assured returns.

More In-Depth Reading: What is a multi-year guaranteed annuity?

Indexed Annuities

These fixed annuities offer returns based on a specific market index, like the S&P 500 or a fixed interest rate. While they provide the potential for higher returns, they also come with a safety net, ensuring your principal remains intact. Unlike RILA annuities, you can not lose money due to poor stock market performance.

More In-Depth Reading: What are indexed annuities?

Long-Term Care Annuities

A unique blend of fixed annuity and long-term care insurance, these annuities ensure that if you ever need long-term care, the annuity can cover those expenses, offering peace of mind.

More In-Depth Reading: What is a long-term care annuity?

Variable Annuities

With variable annuities, your returns are based on the performance of investments you choose, typically mutual funds. While they offer the potential for higher growth, they also come with higher risks and fees.

More In-Depth Reading: What is a variable annuity?

RILA (Registered Index-Linked Annuities)

RILAs, also known as structured annuities, blend features from fixed and variable annuities. They can lose money but offer some protection from market downturns while still allowing you to earn linked to an index. This means you have a chance for higher returns than a fixed annuity but with some protection against market losses.

More In-Depth Reading: What is a RILA annuity?

Different Types Of Annuities With Examples

Insightful Analysis

Annuities are not a one-size-fits-all solution. Your choice should align with your financial goals, risk tolerance, and retirement timeline. For instance, if you’re risk-averse, fixed or indexed annuities might be more appealing. On the other hand, if you’re looking for growth and are comfortable with market volatility, variable annuities could be your go-to.

Types Of Annuity Products

Annuity Types At A Glance

BenefitVariableFixed IndexFixedImmediate
Principal ProtectionNoYesYesYes
Access To PrincipalYesYesYesNo
Control Over MoneyYesYesYesNo
Tax-Deferred GrowthYesYesYesNo
Guaranteed GrowthNoYesYesNo
Guaranteed IncomeYesYesYesYes
Inflation ProtectionYesYesNoYes
Death BenefitYesYesYesYes/No
LTC HelpYesYesYesNo

Comparing Annuities Based On Your Financial Goals

The “best” annuity product depends on your financial goals and circumstances.

Safety vs. High Returns

If your priority is capital preservation, comparing annuities will likely lead you to opt for a fixed one. However, a variable annuity might be worth considering if you’re willing to shoulder some risk for potentially higher returns.

Immediate vs. Deferred Annuities

Another factor to consider in your annuity comparisons is the payout start date. Immediate annuities begin paying out almost immediately after you make your initial investment, whereas deferred annuities start payouts at a future date, which you choose.

Every Type Of Annuity

Conclusion:

Navigating the world of annuities can seem daunting, but with the proper knowledge, it becomes a powerful tool in your financial arsenal. Whether you’re drawn to the guaranteed returns of fixed annuities or the growth potential of variable ones, there’s an annuity tailored to your needs. Remember, it’s not just about securing your future; it’s about ensuring a comfortable and fulfilling retirement. Armed with this comprehensive guide on annuity types, you’re now poised to make decisions that align with your vision for the golden years.

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Frequently Asked Questions

What are the 3 types of annuities?

The three types of annuities are Fixed Annuities, Variable Annuities, and Indexed Annuities.

What is the safest type of annuity?

Fixed annuities are generally considered the safest type as they provide guaranteed income, unlike variable annuities.

Which is the most riskiest type of annuity?

Variable annuities are typically the riskiest type due to investment in market securities, leading to potential gains or losses.

Who regulates variable annuities?

Variable annuities are regulated by the state insurance commissioners, FINRA, and the Securities and Exchange Commission (SEC).

Who regulates fixed annuities?

State insurance commissioners primarily regulate fixed annuities through the National Association of Insurance Commissioners (NAIC).

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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