All You Need To Know Before Entering Into An Annuity.

What is an Annuity?

An Annuity is a contract between an individual and an insurance company that requires the insurer to make payments to you in agreed measures.

Individuals put their money in an insurance company and are guaranteed a steady income when they retire.

They are purchased in a lumb-sum or a series of payments, usually to a life insurance company which invests the money.

Although contributions are not tax deductible,as with IRAs and 401 K (s) annuities allow greater flexibility in establishing the starting date and distribution of durations.

   4 Types Of Annuities

1.)Fixed Annuity

These earn interest at rate established by the annuity company.

The rates are comparable to those for savings accounts or treasuries.Fixed annuities are not good hedges against inflation,let alone vehicles for growth.

2.) Variable Annuity

These offer a different number of securities to invest in—primarily mutual funds—and thus have earnings in league with stock indexes.

3.) Immediate Annuity

These begin distribution within a year of lump-sum payment.

For an individual with an immediate cash from inheritance or sale of property,an immediate annuity guarantees income for life without the  responsibility of managing investments.

Immediate annuities are usually fixed.

4.)Deffered Annuity

These begin distribution at a future date specified by the owner.They can be either fixed or variable—most are fixed — and offer the same benefits as immediate annuities.

Advantages Of Investing In Annuities

•They guarantee Investors Income for life.

•No headache in managing investments done by your money.

•Unlike IRAs, Annuities do not limit Contributions.

•Contributions can come from other sources other than just wages.

•Distributions can be delayed at owners discretion

Disadvantages Of Investing In Annuities

•They have minimal tax advantages.

•Contributions are not tax deductible.

•Distributions are taxed.

•Only the earnings are tax deffered.

•When the annuitant dies,assets are subject to income and estate taxes.

           Final Word

When considering to put your money in an annuity it is advisable to consult an investment expect who will guide you to understand flexibility of policies in various insurance companies and any other support you will require.