What is an Annuity as well as How Does it Work

  • Annuities are a hot topic right now, but not everyone understand what they are how they will work for them. Annuities can make you a lot of money, but you have to know what you�re dealing with. Here is a guide on what they are and how they work. Annuities differ greatly from settlement funding rates, read on.

    An Annuity is�

    An annuity is basically an agreement where you will make one or multiple payments, and in exchange you will receive a set amount of income for a period of time. They are a smart investment if you plan on retiring, or living off of a steady income for the rest of your life.

    They are technically investments, although they are really an insurance contract sold my insurance companies only.

    The Different Kinds of Annuity Investments

    Fixed Variable Indexed How do they work?

    Fixed, Variable and Indexed annuities are the basic three investment options that you will receive.

    A fixed annuity: will pay out a strict fixed return rate on your money investment. This is a guaranteed and predictable income. It is also not affected by the financial markets.

    A variable annuity: will pay out a variable return rate on your money investment. This choice typically has a minimum amount guaranteed, although the rate can increase on your underlying investments, such as stocks or mutual funds.

    An indexed annuity: will pay out a return rate on your money investment that is directly linked to an economic index. This annuity option is considered a fusion of fixed and variable annuities. With this type you will get a guaranteed minimum income, but you will also get a higher return when the market is booming.

    You Can Customize

    One of the nice things about annuities is that you can customize the way you pay your premiums, when you will begin to receive this income, and in what variations you will receive it. (Example: Bi-Monthly, or Annually)

    Immediate or Deferred

    An immediate annuity will provide you income right away (technically within a year). You will put down a big cash payments, and you will get a steady income every month. A deferred annuity will give you the money in the future. You will have to make one or more contributions during a saving phase, and then you will get the income as you prefer.

    Annuities are great savings investments that will help you to balance your money, and you will know that you are covered if your car breaks down or you need to move. Your money will be safe in investments, and you will be able to retire or quit your job knowing that you will be receiving a good income. Call DRB Capital with questions about your annuity or structured settlements.