Personal Finance: What are annuities?
Annuities are contracts between a life insurance company and a buyer. These contracts allow the buyer to make a single investment, or a series of investments, throughout the “accumulation period” during which money grows, tax deferred. At the end of the accumulation period, the contract provides a lump-sum payment or a series of payments which may include some of the following variations: Income for life with: • nothing remaining upon death • 10-20 years of guaranteed payments to a beneficiary • a lump-sum payment at death equal to the difference between the fund balance and payments received • payments continued at some level for the life of a survivor • a specified period or amount Annuities are most often used as a long-term investment for retirement. There are three types of deferred annuities: fixed, variable, and market-value-adjusted (hybrid). The fixed and variable deferred annuities are further classified as single premium deferred (SPD) and flexible premium deferred (FPD) dep
