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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)
CD Annuity
Equity-Indexed 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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Equity-Indexed Annuity
An equity-indexed annuity (EIA) is a fixed annuity, either immediate or deferred. An EIA
earns interest or provides benefits that are linked to an external equity reference or an
equity index, but it does not participate directly in the equity reference or equity index.
The value of the index might be tied to a stock or other equity index. One of the most
commonly used indices is Standard & Poor's 500 Composite Stock Price Index, which is an
equity index. The value of any 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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