What Are Annuity And Fixed Annuity And How They Work

By Author: Robert Cook
Total Articles: 111
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An Annuity can be defined as an investment that is made through an insurance company. It is a representation of a contractual relationship between you and the insurance company. Although, Annuity is offered by the insurance industry but it has very little or no features similar to insurance coverage plans. You can purchase it from insurance companies, banks, brokerage firms, savings and loan institutions, financial planners and advisors.

When you buy an Annuity from an insurance company, the company provides certain assurances to you in return. However, these assurances are determined on the basis of the company issuing the Annuity and the type of annuity plan chosen. An Annuity can be categorized in the following three ways:

1. the way money is invested either fixed or variable

2 When the income is required either immediate or deferred and

3 If additional amount of money can be added to the investment at any point of time either flexible premium or single premium

Thus, all these features make Annuity ...
... the best investment instrument for the retired people because it provides them an extra income post retirement in addition to their insufficient pension so that they can lead a relaxed life without any financial tensions and worries.

As we all know that in present times it is essential to have financial stability at every point of life even after retirement. Moreover, financial stability is all the more needed after retirement because the only source of income is pension and that is also not sufficient to meet their expenses. Therefore, some sort of investment is necessary. Although there are many types of annuities but the best option for the retirees is Fixed Annuity.

In Fixed Annuity you will have to provide money to the insurance company initially. This money so invested increases in a tax-deferred manner and finally after a specified period of time the initial investment along with any other gains is paid back to the investor either in lump sum or as regular payments. Fixed Annuity provides a guaranteed rate of return to the investors on their investment. Thus, Fixed Annuity is considered to be the most stable way to earn income after retirement because you will not have to face the risk of any fluctuations in the market and your returns will be fixed as they will not increase or decrease.

Thus, Annuity and Fixed Annuity are really beneficial for the people and are a must invest options.