Fixed annuities are typically considered a safe long term investment. It is an agreement between you and a life insurance company and can be purchased with one single large payment or several partial payments. The agreement implies that the insurance company will pay you a fixed rate of interest for a set period of time. A fixed annuity can be paid out immediately (fixed immediate annuity) or deferred (fixed deferred annuity).
Indexed annuities allows the investor to participate in the market fluctuations by having the interest rate tied to economic performance. An indexed annuity is very similar to a fixed annuity in nature. It's return on investment and risks are best for a medium to long term type of investment.
There are many factors that determine the interest rate of an index annuity and the rate fluctuates day by day. In addition, the return on investment can be either immediate or deferred.
A classification of annuity that describes how the disbursements or distributions are paid out. With this type of investment the distributions start immediately after the contract between the annuitant and the insurance company is created and paid with one lump sum.
A classification of annuity describing the type of pay out the annuitant receives. This contract of the annuity is paid into with one single large payment, therefore it creates monthly cash flow until the annuitant expires. After expiration any value left in the investment reverts back to the life insurance company.
A classification of annuity that describes how the contract between the annuitant and the life insurance company is created and paid into as well as how the disbursements or distributions are paid out. Deferred annuities have an "accumulation period" and pay out of distributions begins after the accumulation period concludes. The interest earned are also tax deferred.
Investors who wish to save for their retirement usually choose the deferred type of annuity. This allows the investor to pay for the contract in payments rather than one lump sum, thus giving the investor the ability to use their assets for other things.
A variable annuity is contract between you and a life insurance company and purchased with a lump sum payment or several partial payments. The annuity is then spread out into different sub-accounts that can include: mutual funds, stocks and bonds, or money market accounts. As the name implies, the rate is variable and dependent upon the performance of the investments that you choose.
Variable annuities are long term investments that can generate monthly cash flow once the payout phase begins, and the payout phase is dependent upon the structure which can be immediate or deferred.