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In selecting what annuity type caters your needs and wants at the same time, you have to evaluate the options very carefully. Look at their similarities and weigh their differences so that at the end you will have no regrets in buying one.

Two annuity types are greatly considered when it comes in annuity buying. Prospective annuitants are torn between the choice of indexed annuity and immediate annuity. Which is the more appropriate one for you? Ponder on each type and consider weighing both of each first.

Indexed annuity is a kind of annuity that has payouts that are tied in financial index. Sometimes it is also known as equity-index annuity. This kind of annuity is designed especially for those clients who wish to own an annuity that gives payment based on interest rate of an equity index. The contract of this annuity guarantees an annuitant that the he or she will receive payments that is related to the positive return in the index. No matter what happens, the annuitant will still receive a fixed return from his or her principal payment.

Indexed annuity sounds confusing right? It is because indexed annuity is a meeting point of fixed annuities and variable annuities. The payments that the annuitants receive are based on a certain market index. This market index is most of time the S&P 500.

Indexed annuities have limitations also like some amounts that are credited may be capped, upside and downside. That means that if the upside cap is 8%, the account will only be credited 8% even if the S&P 500 rises beyond that. However, even if this is the case, many investors who are afraid of deflation choose indexed annuity because there are more probabilities that this kind of annuity could pay more over time.

On the other side, immediate annuity quotes offer annuitants an immediate payout not long after the purchase of the annuity. They can choose between immediate fixed annuity and immediate variable annuity. In immediate annuities, it is obvious that annuitants can choose to have their investments fixed or variable. Meaning, if an annuitant choose to have immediate variable annuity, the interest rate of his or her annuity can go down or low depending on the performance of the investment and stock market. If, on the other hand, he or she goes for immediate fixed annuity, the interest rate of his or her payment will not be affected by the ups and downs of investments and the investment company. The rate will be the same rate until the contract expires.

Immediate annuity quotes are also quite popular among retirees because of its features. If you want to buy an immediate annuity, you just have to pay a lump sum of money as a principal. This money could be taken from their retirement plans and funds such as the 401 (k).  This kind of annuity can also include beneficiaries in the annuitant’s account. The more beneficiaries the annuitant has, the lower payment he or she will receive each payout.

That being said, we can see that the indexed annuity and the immediate fixed annuity somehow look similar. It is because they are both fixed. An immediate annuity could either be fixed, variable or indexed. But, an indexed annuity does not necessarily need to be an immediate annuity.

Both of these annuities – the indexed annuity and immediate annuity aim to provide financial assistance and guarantees financial stability over a period of time. Both look and sound promising but it is important to consider and assess your own situation before buying one. Choose what you think is best for you.