By: Sarah Conner Published: Saturday, May 01, 2010

Annuities are more like other retirement savings vehicles offered by insurance companies but it differ at few points that could be comparatively beneficial for people. It includes tax deferral, lump sum withdrawal of money, security of full return of principal with credited interest and probate avoidance. Annuities are differently beneficial for different kind of people and there are four main types of them as fixed, fixed index (formerly known as equity indexed), immediate and variable Annuities. In this content I would like to provide few useful details to understand these names better and to make the right decision for investing your money.

Fixed Annuities include fixed rate of return for a time period and after that new fixed rate is declared for next period of time. A guaranteed income can be opted for lifetime or a certain period as per your convenience like 5, 10 or 20 years. Your gain due to the interest on your principal and on the credited interest will be tax-free this is called tax deferral as long as the money stays in Annuities. Next comes fixed index ones that are almost similar to previous ones. Here invested money gets more potential to return more credit if employed index performs well over the period of crediting but if it goes down then you won’t lose your money as it is not in the market.

Third ones are immediate Annuities. As the name suggests, insurance companies start paying immediately. These vehicles are mostly used for special purposes as these offer lower interest crediting rates so one can not use them for regular income. And the last ones are variable Annuities that are totally different from other ones. One need to be securities licensed for selling these types of Annuities and here you have to allocate premiums into investment accounts like stocks and mutual funds because your money will be invested rather saved.

So here is a risk of losing money unlike other three above mentioned Annuities but if market does well there are chances to earn lots of money. Usually people choose any of the first three Annuities just because of the security only very few people take risk to go with last one. Experts also advise to choose any of top three but overall Annuities are considered to be better and safer vehicles for retirement savings than others.

About Author: Sarah Conner is Financial Consultant for Chums Finance UK, Please visit the best option for Annuities, Any Purpose Loans.

Category: Annuities

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