What is an annuity?
Although many folks have heard this word, there is much confusion on this topic. Annuities are also known as Income for Life, Paycheck for Life and an excellent way to supplement Your Retirement Income without risking your principal.
The Most Common are:
- Fixed Annuity is a contract between an individual and an Insurance Company that when a deposit is made, there is a fixed interest guarantees for the term of the contract.
- Fixed Indexed Annuity is an insurance contract between an individual and an Insurance Company that guarantees the initial investment, plus when the Index associated with the reallocation in the contract earns interest, that becomes the brand new contract balance and it continues for the term of the contract without the downside of the stock market.
- Variable Annuity is a contract between an individual and an Insurance Company that does not guarantee an interest rate, however it may offer features that can guarantee your principal upon the end of the term of the contract and its returns are based directly from the performance of the stock market, S&P, Dow Jones. Some folks like these contracts because if they pay for their principal to be guaranteed, these contracts carry many costs.
Depending on each specific type of contract you purchase, many more benefits can be associates with your specific contract.