Understanding Different Annuity Payments

The general public, especially young people have no idea what an annuity payment is, nor do they think anything about it. The only groups which are interested in annuity payments are people who are thinking about their future. They are concerned about how they will support themselves in their golden years and rightly so, for an annuity is simply an agreement, or contract between an individual and a cover, or insurance company. Meaning, you provide the company with long-range goals and discuss with them in length what your retirement needs are and what you are willing to invest initially; and in return, the company agrees to pay you back by making lump-sum payments, or a sequence of payments. The company agrees to make intermittent payments at some future date or beginning immediately which ever you work out with the company. So, understanding an annuity payment is the first step in understanding the process that allows us to plan for our future.

There are different types of annuity payments. They suggest various strategies for your investment in the future. Some annuities even offer to pay a death benefit to your beneficiary.  Most of them are tax-deferred while they are growing; however, when a withdrawal is taken out of the account, it is considered income, and is taxed with standard income rates.

One type of annuity is called a fixed annuity. With this type of annuity, the cover or insurance company agrees to pay a particular rate of interest while your account is growing, and that interest earned cannot go down. The company spells-out and agrees that your payments will be a certain amount for each dollar in your account. The intermittent payments can be for a definite period or an indefinite time, such as spaced over your lifetime, or the lifetime of you and a loved one.

In addition to the fixed annuity, there is a type of annuity, which is called an indexed annuity. In this type of annuity the interest varies according to the stock price of the investment. There is a specific minimum, and regardless of the performance of the stock or investment, the contract value will be no less than that minimum regardless of the fluctuation of the stock.

Another annuity is the variable annuity. This just means you choose your investment options, and these are typically mutual funds. Your future payments will then depend upon and vary depending on the investments you decide to be the best fit for your money.

Lastly, the life annuity is set up by a life insurance company. Basically, it is a form, long life or endurance insurance, meaning it is designed to pay benefits if you survive to a pre-defined age, which usually is a rather high age such as eighty-five or more.

Any of these annuities can be purchased to help make your retirement years easier financially. Whichever annuities you decide to put into motion for your future financial stability keep in mind these potential payments will provide a solid income during retirement. These annuity payments will greatly help with the day to day expenses and medical costs as you grow older, and give you peace of mind in an ever-changing economy.