Annuities can be confusing for those who do not have a strong understanding of financial jargon. An annuity is essentially a contracted financial product that is based upon investing in growth funds that will then be paid back for retirement. There are different types of annuities that are dependent on your own financial situation and goals for future retirement.
Single Premium Deferred Annuity (SPDA)
A Single Premium Deferred Annuity is an annuity that is paid for upfront in one large lump sum. Rather than a contract that asks for money on a regular payment basis, an SPDA is a one-and-done type of deal. An SPDA is fitting for investors who rely on a steady income and have a lump-sum balance to invest with. Some benefits with SPDAs are that they can either be fixed or variable. As well, distributions are taxed only when you withdraw from them.
Immediate Annuities are pretty simple to understand due to the fact that they are almost identical to a life insurance plan. This type of annuity does not wait to be paid out until your death. Insurers pay out in regular installments during your lifetime, rather than one large amount after death. The amounts and period in which you are paid are flexible in terms of your desired situation.
A variable annuity is the opposite of a fixed annuity. This annuity allows you to select an investment and pays you an amount of income that is dependent on the performance of that investment. There is not a fixed amount that you will receive regularly.
This type of financial contract is essentially a combination of a fixed and variable annuity. It gives you a guaranteed return that is usually low risk. It also allows you to have better gains when the stock market is strong. This annuity is usually pitched as a retirement choice that has the “best of both worlds.”
Tax-Sheltered Annuity (TSA)
A Tax-Sheltered Annuity allows an employee to put in a portion of their income into a plan directed towards retirement. The contributions made into the plan are taken out of the employee’s income directly. This allows input into the plan to be tax exempt until an employee decides to start taking money out of the plan. A common TSA plan in the U.S. is the 403(b) plan. TSAs are also comparable to 401(k) plans.
© 2017 Carmel Valley Insurance, Inc.
THE INFORMATION ON THIS WEBSITE IS NOT AN OFFER TO SELL OR SOLICITATION OF ANY KIND OF INSURANCE (FIXED PRODUCTS). PRODUCTS AND SERVICES REFERENCED ARE OFFERED AND SOLD ONLY BY APPROPRIATE APPOINTED AND LICENSED AGENTS. THE MATERIAL HAS BEEN PREPARED FOR INFORMATIONAL AND EDUCATIONAL PURPOSES ONLY. IT IS NOT INTENDED TO PROVIDE, AND SHOULD NOT BE RELIED UPON FOR ACCOUNTING, LEGAL, TAX OR INVESTMENT ADVICE. PLEASE CONSULT A PROFESSIONAL WITH AN EXPERTISE IN THESE AREAS REGARDING THE APPLICABILITY OF THE INFORMATION PERTAINING TO YOUR SITUATION. BY RESPONDING TO ANY INFORMATION YOU MIGHT FIND INTERESTING, YOU AGREE TO BE CONTACTED BY A LICENSED INSURANCE AGENT REGARDING RETIREMENT INCOME PLANNING AND/OR LIFE INSURANCE PLANNING. PERCENTAGES REFER TO EITHER FIXED OR INDEXED ANNUITY CREDITING RATES OR LIFE TIME INCOME WITHDRAWAL AMOUNT BASED UPON YOUR INITIAL PREMIUM AND MAY ALLOW THE OWNER OF AN ANNUITY TO WITHDRAW UP TO A CERTAIN PERCENTAGE OF THEIR INITIAL PREMIUM PER YEAR FOR THEIR LIFE TIME. THIS WITHDRAWAL RATE MAY NOT BE AVAILABLE FOR ALL APPLICANTS AND CAN VARY BASED UPON YOUR AGE, STATE, THE START DATE OF YOUR LIFETIME INCOME, AND OTHER FACTORS. PERCENTAGES CAN ALSO REFER TO POTENTIAL CREDITING RATES FOR AN INDEXED LIFE INSURANCE POLICY. NOT ALL PRODUCTS AND SERVICES ARE AVAILABLE IN ALL STATES. CARMEL VALLEY INSURANCE, INC. IS LICENSED IN THE FOLLOWING STATE: CA. CALIFORNIA LICENSE # 0G89325. NOT FDIC INSURED. NOT BANK GUARANTEED. MAY LOSE VALUE, INCLUDING LOSS OF PRINCIPAL. NOT INSURED BY ANY STATE OR FEDERAL AGENCY.
Investment offered through Hermes Econometrics. Hermes Econometrics is registered with the State of California as an Investment Advisor and in the State of Arizona. All information contained herein is for informational purposes only and does not constitute a solicitation or offer to sell securities or investment advisory services. Such an offer can only be made in states where Hermes Econometrics is registered or where an exception from such registration is available, and no new account will be accepted unless and until any and all local regulations have been satisfied. For more information on Hermes Econometrics please visit: www.econ101.com