Annuities

Annuities

What are annuities? Today, an annuity means a contract with an insurance company, and that term, “annuity,” can mean different things—for example, variable or fixed indexed annuities. 
Annuities can vary in four ways:

The premiums you pay. The money you use to purchase a contract is called the “premium,” and annuities can accept either a single premium or a series of ongoing premiums.

When the company makes payments to you. Payments can start immediately or be deferred to a date of your choosing.

How the premium earns interest. Interest is either earned by a rate agreed upon in advance or by crediting interest based on an external market-based index like the S&P 500 index. The two main types are variable and fixed or fixed indexed annuities. 

Penalties associated with early withdrawals. Although you can earn interest in an annuity, it is not a savings account. If you buy an annuity, it should be used to reach long-term goals. All annuities have surrender charges, so make sure your adviser helps you understand them.
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