Immediate and Deferred Annuities
The terms immediate and deferred relate to when the investor receives payments in return for their investment.  Immediate annuities, as the word would suggest, refers to when investors receive payments immediately.  Deferred annuities refer to when the payments are deferred for some period of time, maybe months, maybe decades – it’s up to the investor (or their age).  Immediate payments are an option for those 59.5 years of age or older.  All investors that are younger, must wait until that age to receive payments (unless they choose to withdraw early which usually comes with a penalty).  Those 60 years of age and older can still defer their annuity, or receive payments immediately it is up to them.

 

 

 

 

Usually influencing the decision (other than age) is the availability of decent alternatives.  If an annuity is providing an investor with a combination of a good return at a low risk that is hard to find elsewhere, obviously they are more likely to choose to defer payments.  If there are other available alternatives, an investor may choose to receive payments as soon as possible.
Fixed Annuities
Fixed annuities provide a fixed rate of return for a fixed amount of time, or for life.  They are similar to some bonds or Bank CDs in that they are considered a secure investment for getting a postive return on investment.  However, they do vary in a number of crucial ways.  As with all annuities, fixed annuities provide tax deferral.  They also often provide similar benefits to life insurance.  For more information, please see our Fixed Annuity section.

Variable Annuities
Variable annuities allow the investor the freedom to invest in stocks, bonds, mutual funds, and many other types of investments one might normally invest in.  They can be as risky or as safe as you choose, based on your investments.  They do not offer the same safety that a fixed annuity does, but do offer the potential for a higher return.  Variable annuities are more frequently invested in by younger people still growing wealth for retirement versus current retirees.  They offer a great option after you have invested all you can in your 401k or IRA, as they still allow for tax deferral protection.

Index Annuity
An index annuity is in between variable and fixed in terms of risk, and the potential return.  With an index, the investors money (or part of their investment) is placed in a stock index, usually the S and P 500.  This provides the investor with the opportunity to achieve a higher return than a fixed annuity, if the stock goes up, but of course, it also provides some more risk.  Usually an index annuity comes with a fixed option, providing the investor with security if market optimism changes.

The type of annuity that’s right for you depends on many factors, including your propensity for risk and your personal retirement and family goals.  To talk to a licensed advisor, fill in the “Annuity Quote” page, and a trusted advisor will give you a free, no obligation call to answer your questions, discuss your options, and recommend a solution that may be right for you.