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What are annuities?

Types of Annuities

Annuities Fees & Expenses

Annuity Terms Glossary

Taxation Of Annuities

Objections to Annuities

State Annuity Guaranty

Questions about long-term care?

When most people think of longterm care for the elderly, they think of nursing homes. But it can involve much more than that.

What is an annuity?

 

An annuity is a contract between you and an insurance company in which the company promises to make periodic payments to you, starting immediately or at some future time. You buy an annuity either with a single payment or a series of payments called premiums. These financial products are primarily used as an income stream for retirees.

Some annuity contracts provide a way to save for retirement. Others can turn your savings into a stream of retirement income. Still others do both. If you use an annuity as a savings vehicle and the insurance company delays your pay-out to the future, you have a deferred annuity. If you use the annuity to create a source of retirement income and your payments start right away, you have an immediate annuity. 

The period of time when an annuity is being funded and before payouts begin is referred to as the accumulation phase. Once payments commence, the contract is in the annuitization phase.

KEY TAKEAWAYS

  • Annuities are financial products that offer a guaranteed income stream, used primarily by retirees.
  • Annuities exist first in an accumulation phase, whereby investors fund the product with either a lump-sum or periodic payments.
  • Once the annuitization phase has been reached, the product begins paying out to the annuitant for either a fixed period or for the annuitant’s remaining lifetime.
  • Annuities can be structured into different kinds of instruments: immediate, fixed or variable.

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