Types of Annuities

Investing is about knowledge. Knowing the different options available in annuities will help you find the annuity that will work best for you. There are many, many annuities for sale. A professional can help you make sense of them and find the right one for your life and financial circumstances.

Annuities, like most things, come in different varieties to meet your needs. Some of these will be determined for you, like how you pay for the annuity, and some you will decide. As with all financial products, it is a good idea to have your plan checked by a financial planning professional before you invest.

How Annuities are Purchased

The first choice in annuities is how they are purchased. An annuity can either be purchased all at once or in pieces. Lump sum annuities is self defined. Put it all in at once, and watch it grow. You may also set up a monthly payment, allowing even the economically challenged to afford it.

Fixed Annuity

The three main types of annuities are 'Fixed', 'Variable', and 'Hybrid'. A Fixed annuity guarantees a certain interest rate on your investment. Naturally, this will not be a large figure, but it will make sure you don't lose your principal, and will even gain a specified interest in return. Like 'Blue Chip' stocks of years gone by, it is a slow, steady growth.

Variable Annuity

A variable annuity is an investment where your payments are based upon the performance of mutual funds that you choose from a list. You can choose those you feel will make money, or you can let the company decide. The main difference in this type is that, if the market does poorly, you could even lose all of your money!

Hybrid Annuity

Hybrid annuities offer some of the performance of variable annuities with a guaranteed minimum payment. That way you can take advantage of the market's performance while ensuring that you don't lose your principal. Your financial advisor can give you good advice on this type of annuity.

Annuity Payments

You will also have choices when it comes time to start drawing on the annuity, which is why it is called 'annuitizing'. You can choose to be paid in one lump sum , or you can be paid out over time. If you take periodic payments, you can choose to be paid for the rest of your life, and gamble that you will beat the odds and live longer than they figured without running out of your annuity funds; or you can choose to take a little less and guarantee that you-- or your beneficiary --will be paid for a certain number of years. You can even protect two people's income by specifying that the survivor keeps getting paid. Of course, the monthly check will be smaller.

As with many financial products, annuities are worded to sound fancy and confusing. It helps with marketing. The main difference between annuities is how much you get paid. To compare annuities, ask how much they pay for $100,000 per month. This will let you decide which annuity pays you the best over time.

Annuity for Retirement Income