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Annuities

Fixed annuities play an important role in today’s economy because they help calm the volatility of income originating from investments and are mostly used by individuals not in the workforce.  They usually provide the annuitant a set amount paid to him at set intervals for a specific period or event.  There are many options that can be added to most annuities for a fee.

Fixed annuities can be purchased for a lump sum and some can be added to on a periodic basis.  The money that is invested in a fixed annuity is guaranteed to earn a fixed rate of return by the sponsoring insurance company during the accumulation phase of the annuity (this depends on the annuity).  Each annuity is different in most cases a plain vanilla fixed annuity is set up to have any value remaining after the death of the owner revert back to the insurance company.  It is always best to shop around when buying any product and annuities are not any different; you can often negotiate the price of the annuity and the amount of money that will be paid out can vary greatly depending the insurance/financial intermediaries selling the annuity.

There are two main forms of plain fixed annuities; life annuities and time certain annuities.  They are just as they sound life annuities pay a predetermined amount for a specific period until the death of the annuitant and time certain annuities pay a predetermined amount for a specific period until the annuity expires which may be before the death of the annuitant.   

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