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When you are investing for retirement, there are many different financial options you will encounter that can help you save up. Annuities are some of the most popular investing choices for retirees. But if you do not know what they are, you cannot take advantage of this type of investment opportunity for your own retirement plans. Find out what annuities are and learn all about the different types of annuities available to you, the retirement investor, with Calvert and others in the post below.
What Is An Annuity?
Annuities are contracts between an investor and an insurance company. Annuities are not life insurance policies. But, they are typically offered to investors by these companies. An annuity contract is when you pay money to an insurer. Then, you receive certain benefits during retirement – typically an agreed-to amount of money. Then, you can opt to receive those payments at the beginning of retirement or throughout retirement in several different payouts. There are many different types of annuities that investors can choose between. That is why annuities are such popular retirement savings options for investors to further contribute to their nest egg.
Lifetime Annuities
Lifetime annuities are those annuity contracts that exist for the duration of your life. With these types of annuities, you, the investor, will receive payouts for the entire length of your life. When you pass away, your annuity benefits stop. Some of these annuities are also available as joint lifetime annuities. That means that the agreement pays out until both partners who are a part of the annuity agreement have passed away. This is particularly beneficial for married couples, who often want to ensure that their partner is taken care of even after they have passed on. A lifetime annuity is just one of the investment types that you can choose when using them to save for retirement.
Specific Term Annuities
Annuities with specific duration terms are also available on the market. These plans differ from lifetime annuities because they do not pay out for the rest of your life. Instead, they pay out dividends for a pre-determined length of time. If you are nearing retirement, you may wish to supplement your nest egg with a 5 year annuity agreement or something similar. There are many different term limits possible. But, the important part is knowing that these non-lifetime lasting annuities can last 3 years or 10 years. It all depends on the insurance product you choose to buy.
Variable Annuities
A variable annuity include investing in diverse sub accounts. These sub accounts are sort of like mutual funds with some of the best bond rates. They are tired to the stock market. Thus, with variable annuities, your payout will be varied based on market performance. With a variable annuity, you may also get access to death benefits. This is a considerable advantage over other types of annuities, which do not offer death benefits and last just the duration of your life. If you are considering investing in an annuity, a variable annuity is certainly one type of investment to consider.
Equity Indexed Annuity
A fixed annuity, or equity indexed annuity, is the most complicated type of annuity for investors to understand. To put it simply, these types of annuities usually have a minimum floor of how much you will paid out. But at the same time, they also have a cap on how high your income will be each payout as well. These types of annuities are not common. In fact, many investors have trouble recommending these types of annuities to average retirement investors. But, it is good to know the options available to you, of which a fixed annuity is one.
If you are trying to save for retirement while running your Toronto business, annuities can certainly help you do that. An annuity will provide you post-retirement income that will help you have a comfortable and enjoyable life after your career ends. But first, you need to be aware of all the different types of annuities offered to you from all different life insurance companies. No matter which of these types of insurance products you use, you are sure to benefit from the increased retirement investment returns in the end.
