What Are The Four Types Of Annuity?

What Are The Four Types Of Annuity?

1 Answer

  1. There are actually five categories of annuities and they are as follows:
    1. Fixed annuity-
    As the name suggests, fixed annuities come with a guaranteed and fixed interest rate that doesn’t differ beyond the terms of the contract. They are safe and predictable and these investments also deliver unspectacular returns.
    2. Variable annuity-
    Again to go by name, a variable annuity comes with more risks and potentially higher rewards and we can say its opposite of fixed. The interest rate of variable annuities is tied to an investment portfolio. Also, variable annuity payouts can either be fixed or vary along with the account’s performance.
    3. Indexed annuity-
    Indexed annuities basically have characteristics of both fixed and variable annuities. It’s a way to balance the risks and rewards, carrying lower risks than variable annuities and higher income potential than fixed annuities.
    4. Immediate annuity:
    An immediate annuity is just what it’s name says. The payouts begin as soon as the buyer makes a lump sum payment to the insurance company.
    5. Deferred annuity: A deferred payment allows the money in the account more time to grow. Subsequently, that could build up into a substantial sum and result in larger payments.

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