Article: Annuities Defined
Generally, people from middle-class families think that their financial needs will not be met after retirement just through a pension fund or other employment related financial benefits. Therefore, they look into investing in annuity plans. Annuities provide a fixed income paid at regular intervals over a specified period of time. An annuity is like a contract between the annuity buyer and an institution like an insurance company aimed at providing regular, additional income. On the other hand, a Structured Settlement System is the compensation agreement between a plaintiff and the insurance company (defendant) for the periodic, long term and tax-free payments instead of a lump sum payment for personal injuries.
There are basically two categories of annuities namely "immediate" and "deferred". In the case of immediate annuities, the frequency of making periodic payments is very high. With deferred annuities, are "fixed deferred" annuities and "variable differed". Fixed annuities offer guaranteed income to the annuitant for a fixed time period. The rate of return depends on the cash value of the account and the life expectancy. The company invests in low risk government securities and bonds that guarantees a rate of return.
The rate of return on variable annuities depends on the performance of the underlying investments of the annuity. However, people prefer variable annuity as excess income and the total premium is tax-free. The possibility of achieving long-term returns is higher in the case of variable annuities when compared to fixed annuities. Even for retired people who look for a tax-free regular income after retirement variable annuities is a good way to go.
However, before buying any type of annuity, the buyer should obtain information about the insurance company that is being considered. The company performance is important. Buyers can contact annuity brokers or agents to discuss options.
Author: Alison Cole