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Types of Annuities
Below are brief, general descriptions of some common types of annuities.
Flexible Premium Deferred Annuity (FPDA)
Single Premium Deferred Annuity (SPDA)
Single Premium Immediate Annuity (SPIA)
Fixed Indexed Annuity
CD Annuity
Variable Annuity
Flexible Premium Deferred Annuity (FPDA)
A deferred annuity is one in which benefit payouts begin at a future date. With
a flexible premium deferred annuity, you can vary the amount and
frequency of premium payments (within limits specified by the contract). For
example, if you are saving for retirement you might start by contributing
$100/month to an FPDA, and adjust the amount and/or timing later, depending on
your needs. Or you may opt to make a lump-sum contribution at any time. The
interest earned accumulates on a tax-deferred basis, until benefit payouts
begin.
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Single Premium Deferred Annuity (SPDA)
A deferred annuity is one in which benefit payouts begin at a future date. With
a single premium deferred annuity, the annuity owner makes one premium
payment at the inception of the contract. This payment and the interest earned
accumulate on a tax-deferred basis, until benefit payouts begin.
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Single Premium Immediate Annuity (SPIA)
With a single premium immediate annuity, the annuity owner makes one premium
payment at the inception of the contract, and the benefit payout begins
immediately (e.g., one month) after the premium is paid. An immediate annuity
is generally more appropriate for older persons who want to convert accumulated
wealth into a guaranteed income that begins right away.
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CD Annuity
A type of deferred annuity that guarantees a fixed interest rate for a specified
period of time (typically 5-10 years). The rate is set at the time you purchase
the annuity. Similar to a bank Certificate of Deposit, your interest rate does
not change for the duration of the rate guarantee period you've selected.
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Fixed Indexed Annuity
A fixed indexed annuity is a fixed deferred annuity that earns interest or
provides benefits that are linked to an interest rate or index. The value
of the most commonly used index, the Standard & Poor's 500 (registered
mark) Composite Stock Price Index, or any other index varies from day to
day and is not predictable.
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Variable Annuity
With a variable annuity you select from a range of investment options, typically
mutual funds that invest in stocks, bonds, money market instruments, or some
combination of the three. The value of your annuity will vary depending on the
performance of the investment options you choose. Earnings accumulate on a
tax-deferred basis.
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Tax Disclosure
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