In getting to know about what is annuity, there’s always the need to explore every aspect of the topic. Annuity is a unique viable investment means that can help you enjoy steady flow of income when you go for retirement. It’s a kind of contract you sign with an insurance company whereby you invest your money as a lump sum. The insurance company pays you a certain income amount on an agreed date.
When considering what is annuity, you need to discover more about its various forms. There’s what is known as “Deferred Annuity”. It’s a unique contract that usually delays your income payment for a long time. You have to enter into agreement with your insurer as regards when you want the payment to be made. In most cases, you have to leave your investment to grow and mature for a long time before you think of making withdrawals.
A deferred annuity is usually known for having 2 phases. There are the savings phases whereby you’re expected to invest your lump sum into the deferred annuity account. The other phase is the income phase. Your investment is turned into a unique annuity that gives you the room to receive payments at agreed dates. You simply enter into agreement with your insurer as regards when to receive payments.
Deferred annuities can be variable of fixed. The deferred variable annuity allows you to receive payments on a specified variable date, which you’re expected to choose. On the other hand, the fixed deferred annuity allows you to receive payments on particular fixed date. The choice is always yours to make when it comes to any kind of annuity type.
When exploring what is annuity under the deferred annuity option, you must consider other features. For instance, you’re not expected to receive any income payment until the agreed date is reached. You or the insurer will not break the agreement for any reason. The terms and conditions always apply.
Again, your deferred annuity has lifetime benefits. If for any reason, you die before the agreed payment date is reached, the income payments will also be made to your beneficiary when the time comes. In most cases, your spouse or your child should be added as a beneficiary when you sign the contract deal. There’s also the need to get your beneficiary properly informed about your investment. This will help him or her to know the right steps to take when the time comes.
Meanwhile, deferred annuity can help you gain a lot of tax benefits. You’re not expected to pay any tax until you’re ready to make your cash withdrawal at the appointed time.
From the above, you must have known what is annuity as it pertains to the deferred annuity type. There’s always the need to be properly informed before you decide to invest on any kind of annuity. If you’re confused, don’t act. Let a good financial adviser show you the right step to take.