An annuity is a policy insurers use to grow funds for their policyholders. The process of annuitization causes the policy to create a stream of income for the person who receives the annuity. The insurance company receives payments in a lump sum or installments. These funds earn monetary returns for policyholders.
Who Need an Annuity Plan?
The most common reasons people like these plans include:
1. It allows them to save money for for retirement.
2. The investment is tax deferred.
3. They want a guaranteed source of income.
The Details of How these Plans Work
Annuity insurance is a long-term plan. It’s for people who want to make sure they have income for the duration of their life. Contributions are converted into periodic payments which can last for a lifetime.
Different annuity plans serve different purposes. Choose the one that best fits your goals.
1. Variable. This plan allows you to choose investments and earn returns based on market performance.
2. Immediate. You purchase this plan with a lump-sum. Your income begins shortly afterward. The investment is converted into a steady stream of income.
3. Fixed. In this option, the initial investment and earnings are guaranteed as long as the fixed payments are made.
1. You can save large amounts of tax-deferred income.
2. There are no restraints on the contributions you can make.
3. You can cash out the policy and take a lump-sum payment. Another option is to receive payment in installments over a certain amount of time.