Anuities Have the Ability to Provide Income for Life
Annuities are investment contracts that are issued by insurance companies. Annuities have the advantage of being backed by the claims paying ability of some of the world's most financially sound companies. They can also have a death benefit attached to them so that at one's death the value of the annuity can be transferred to a chosen beneficiary. Annuities also have the ability to provide income for life. The term annuitization means a series of payments over a specified period of time. There are many types of annuities and they include single premium annuities, variable annuities, fixed annuities, and Indexed annuities. A single premium annuity takes a lump sum of money and begins a series of immediate payments over time. Variable annuities allow you to invest in the stock and bond market so as to obtain greater growth of principal due to increases in the underlying separate accounts that drive the value of the variable annuity. Having said this, variable annuities can also lose money if there are market corrections or losses in those separate accounts.
"The term annuitization means a series of payments
over a specified period of time."
Fixed annuities accumulate over time at a set rate of return and do not have a risk of market loss. Indexed annuities are market driven but with a twist. They participate in the market up to a specific cap but they also have a floor. If the market trends upward then you reap the positive gains until a set maximum amount is reached. If the market is negative then your losses are capped at the low end at approximately 0-1%. These type of products are popular among those who would like some market upside but don't want to take any market risk with their money. All annuities grow tax-deferred which is also a redeeming quality.
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