Annuity
Annuity- An annuity is a contract between you and an insurance company in which you make a lump sum payment or series of payments and in return the annuity is to provide a steady stream of income during retirement. Funds accrue on a tax-deferred basis which can help increase growth potential. There are many additional potential benefits of an annuity.
Types of Annuities
Single Premium (SPIA)– This is a contract between you and an insurance company by where you give a lump sum payment and in return you get a guaranteed payment for a specified period of time. There are options for payment. Payments may begin immediately or deferred up to one year from purchase.
Indexed Annuity- Tax deferred annuity whose credited interest to the annuity is linked to an equity index such as the S&P 500 but the funds are not actually invested in the market but merely measured against the market. Index annuities offer the chance of higher yields with protection against market declines.
Fixed Annuity- In exchange for a lump sum payment a life insurance company credits the annuity with a guaranteed fixed rate of interest and also guaranteeing the principal investment. The accumulation of capital grows on a tax deferred basis.