Investing in an annuity is great way to save for retirement or to save for a child's college fund. An additional benefit to investing in annuities is the tax deferred status your money holds during the investment period. There are several different types of annuities and payout options. Here are a couple things to look for when deciding to invest in an annuity.
The types of annuity options available vary according to how money is paid in, how money is withdrawn and how the money is invested.
Single Premium Annuity
Single premium annuities are for when you're investing one lump sum amount.
Flexible Premium Annuity
Flexible premium annuities allow for a minimal investment, with varied payment amounts throughout the investment period.
Fixed Annuity
Fixed annuities are placed in the more conservative investment vehicles like bonds. Your principal investment amount is guaranteed, and a minimum earnings interest rate is guaranteed as well.
Variable Annuity
Variable annuities are typically invested in mutual funds. The principal investment amount is not guaranteed, and payouts are determined by how much your investment earns.