| Tips For Selecting An Annuity And Rates For Annuities |
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| Written by Tom Addison |
| Friday, 15 April 2011 10:34 |
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An annuity is a product offered by insurance companies wherein they enter into a contract with buyers of this product. The annuitant aka buyer has to fund an account with the insurer, and these funds and the earnings accrued are then distributed back to the annuitant in the form of periodic payments. Obviously, there are many ways this can be done, so the annuity rates differ based on these choices.
An annuity is a product offered by insurance companies wherein they enter into a contract with buyers of this product. The annuitant aka buyer has to fund an account with the insurer, and these funds and the earnings accrued are then distributed back to the annuitant in the form of periodic payments. Obviously, there are many ways this can be done, so the annuity rates differ based on these choices. During the initial phase, the annuitant can pay amounts into the account in a single lump-sum and/or in smaller increments. The interest rates offered by the insurer on this amount accumulating in the account may be fixed or variable. Fixed rate products are bought by those looking for a safe and steady income stream, while products with a variable rate often provide higher yields than traditional retirement plans. Obviously, as this interest rate goes up, so will the monthly payments promised to the annuitant by the insurer. These monthly payments the annuitant gets from the insurer can start immediately or be deferred, and they can be for a set period or until the annuitant passes away. The trick, then, is to find an insurer with a product that offers a high interest rate. Apart from these basic options, there are some sub-choices within. As an example, consider an annuitant who chooses a fixed-rate, deferred payment product. The product can be like a CD, wherein the insurer offers a fixed rate which will be in effect as long as the contract is valid. Another way a deferred and fixed rate product can work is by keeping it annually renewable. This means the insurer gets to set a new rate each year. It will be the same rate for a year, but the insurer has the authority to reset this rate for each successive year as long as the contract is still valid. For immediate annuity rates, the factors are different. The annuitant's age and sex will impact the rate, and so will the method of payment chosen. In a nutshell, an annuity is an attractive investment option for those who need a steady income stream, with the added flexibility of taking the distribution immediately or defer it until later. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Looking for more information on Annuities and annuity rates ? Get the exclusive low down instantly in our guide to all you need to know about the different types of annuity investments on http://www.annuitykey.com/ |