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Understanding Annuities FAQ

Understanding Annuities FAQ
Understanding annuities is vital to making the correct financial decision for your individual long-term goals.

It is important to know what an annuity is not, in order to understand how it works for you. An annuity is not a short-term investment tool and is not a savings account, and unlike life insurance, it is not meant to pay death benefits. It is an investment tool and is usually a contract between you and a life insurance company intended to provide you with a steady income in return for your investment. Many people are turning to annuities to assure their income during retirement.

An Annuity can be funded in several ways the most common is a single premium contract where a single payment is made to fulfill the investment requirements. Alternately, there can be multiple premium contracts where several payments are made on either a flexible schedule or a fixed schedule.

You can also choose an annuity with deferred payments or begin receiving your payments immediately.

The type of investment return is very flexible with annuities but the risk levels vary with each type. Understanding annuities and choosing an investment type for your annuity should be done with care and with your risk tolerance in mind.

Fixed Annuities are usually considered low risk and low flexibility annuities. The investment return will be no less than a set rate designated at the time the contract is made. They are relatively secure and with comparatively little risk involved but the gains may be lower than you prefer.

A Fixed Indexed Annuity is more complex than a fixed annuity but far less complex compared to a Variable Annuity. The rate of return on a Fixed Index Annuity is tied to the rate of return of a market index without any of the downside risks. The principal is guaranteed and you share in the market gains but none of the losses.

Variable Annuity Investments are much more flexible with investment options guided by you. They can be high risk or fixed rate of return. These investments can be funneled into high risk or low risk investments. The funds less applicable fees are placed into an account that can be modified by you. Before choosing any annuity you should research your options, align them with your long term goals and decide if the risks are worth the gains when investing if you are interested in a long term stream of income that is unaffected by market trends you may choose a less flexible type of annuity. On the other hand if you prefer to manage your own investments and take risks types of annuities that will serve your purpose. Long-term goals can be well served by choosing the right annuity and in a day and age when many fear outliving their retirement benefits, annuities have a place in financial planning strategies.

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FAQ

Click below to see answers from Robert to questions asked from other visitors...

Fixed and Fixed Index Annuities.   starstarstarstarstar
Can payments be deferred from these annuities until requested? Such that the principal amount continues to grow at it accumulates interest. Thank you....

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