When it comes to saving for retirement, there are a lot of options to choose from. One popular option is annuities. But with so many different types available, it can be challenging to decide which is right for you. This guide will discuss the different types of annuities and what works best for each investor. We will also provide tips on finding the best annuity rates. So, if you’re considering investing in an annuity, read on!
There are 13 types of Annuities.
- What Are the Various Kinds of Annuities?
- 1. Immediate Annuities
- 2. Variable Annuities
- 3. Fixed Indexed Annuities
- 4. Fixed Annuities
- 5. Long-Term Care Annuities
- 6. Deferred Income Annuities
- 7. Two-Tiered Annuity
- 8. Qualified Longevity Annuity Contract (QLAC)
- 9. Structured Settlement
- 10. Secondary Market Annuity
- 11. The Medicaid Annuity
- 12. The Charitable Gift Annuity
- 13. Registered Index-Linked Annuity
- Annuity Types At A Glance
- What distinguishes a deferred annuity from an immediate annuity?
- Next Steps
- Request A Quote
What Are the Various Kinds of Annuities?
Annuities can be a great way to put money away for retirement, but there are many different types of annuities. For example, what is the difference between an immediate annuity and a deferred annuity? What is the difference between a single premium immediate annuity and a joint life deferred annuity? What factors should you consider when choosing an annuity product? These are just some of the questions that will be answered in this guide!
1. Immediate Annuities
An immediate annuity (SPIA) is an insurance contract (with no cash value). A contract owner exchanges a lump sum of money with an insurance company for an immediate, irrevocable series of annuity payments guaranteed for the specified period of the contract.
This is what the lottery uses for its payout option.
2. Variable Annuities
A variable annuity is a tax-deferred investment product for retirement planning that allows you to participate in investments, including stocks, bonds, and mutual funds.
You get all the upside and the downside potential with a variable product.
Variable products offer greater risk than other product types.
You can lose money in a variable annuity.
3. Fixed Indexed Annuities
Fixed-indexed annuities are a type of fixed annuity that earns interest based on changes in a market index measures how the market or part of the market performs.
The interest rate is guaranteed never to be less than zero, even if the market goes down.
Your tax-sheltered retirement accounts can earn market gains with no downside potential and tax deferral.
4. Fixed Annuities
A fixed annuity provides a fixed guaranteed interest for the contract term, similar to a Certificate of Deposit (CD).
Your retirement savings earn a fixed guaranteed amount of interest annually for a fixed period. Sometimes called a “CD annuity.”
Two types of fixed annuities, traditional fixed and Multi-Year Guarantee Annuities (MYGA), guarantee higher interest returns than CD rates.
5. Long-Term Care Annuities
A long-term care annuity is a tax-deferred fixed contract that provides an enhanced tax-free benefit to supplement qualified long-term care services and facilities.
6. Deferred Income Annuities
Deferred Income Annuities (DIA) is an income contract in which a consumer exchanges a lump sum of money upfront today for a deferred, irrevocable retirement income stream (over a fixed period or lifetime) in the future.
7. Two-Tiered Annuity
A two-tier annuity is a tax-deferred FIA contract where you invest money upfront, grow your investment during the accumulation period, and annuitize your future contract values into an irrevocable guaranteed income stream.
Annuitization is required.
8. Qualified Longevity Annuity Contract (QLAC)
A QLAC is a Deferred Income Annuity (DIA), a deferred income annuity type funded specifically by qualified retirement savings plan to defer Required Minimum Distributions (RMD).
9. Structured Settlement
A Structured Settlement is a structured, irrevocable series of periodic payments from an insurance company that is commonly court-ordered, similar to an SPIA.
10. Secondary Market Annuity
A secondary market annuity resells an annuitized distribution (guaranteed income stream payments) in exchange for a lump sum.
11. The Medicaid Annuity
A Medicaid Compliant Annuity is a unique SPIA meant to financially maintain a healthy elderly spouse’s lifestyle while their unhealthy spouse receives Medicaid.
12. The Charitable Gift Annuity
A charitable gift annuity is a transfer by a donor to a charitable organization. In return, the donor receives annuity payments. If the actuarial value of the annuity is less than the value of the donation, then the difference in value is declared a charitable deduction for federal tax purposes. The annuity payments to the donor are tax-free partial returns based on actuarial tables of life expect
13. Registered Index-Linked Annuity
The Registered Indexed-Linked Annuity is a hybrid of the fixed indexed and variable annuity. When an index performance is positive, the annuity may earn interest, limited by a cap or participation rate. Conversely, if the index performance declines, the annuity will earn zero interest and lose value up to a “floor.”
Annuity Types At A Glance
| Variable Annuity | Fixed Index Annuity | Fixed Annuity | Immediate Annuity | Deferred Income Annuity | |
|---|---|---|---|---|---|
| Principal Protection | No | Yes | Yes | Yes | Yes |
| Access To Principal | Yes | Yes | Yes | No | No |
| Control Over Money | Yes | Yes | Yes | No | No |
| Tax-Deferred Growth | Yes | Yes | Yes | No | No |
| Guaranteed Growth | No | Yes | Yes | No | No |
| Guaranteed Income | Yes | Yes | Yes | Yes | Yes |
| Inflation Protection | Yes | Yes | No | Yes | Yes |
| Death Benefit | Yes | Yes | Yes | Yes/No | Yes/No |
| Long-Term Care Help | Yes | Yes | Yes | No | No |
What distinguishes a deferred annuity from an immediate annuity?
The difference between deferred and immediate annuities is when annuity benefit payments begin.
- Immediate annuities provide periodic income payments starting from one month but no later than one year.
- Deferred annuities provide periodic income payments from starting one month to the annuity’s maturity date.
Next Steps
Annuities are a popular retirement savings option and for a good reason. They offer security and peace of mind, tax advantages, and potential earnings. But with so many different types available, it can be challenging to de which is right for you. This guide will help make the decision easier by discussing the different types of annuities and what works best for each investor. We’ll also provide tips on finding the best annuity rates. So, if you’re considering investing in an annuity, read on!
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