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CHOOSING THE TYPE OF DEFERRED ANNUITY
Lot of variations is found in two basic types of deferred
annuities namely fixed and variable. The difference is that fixed annuities
assure that your money will accrue at a minimum specified rate of interest.
But, the company will pay you a higher rate of interest if its experience
of investment is superior to the minimum guarantee where as in variable
annuities, the contract owners direct the distribution of their money
among several different accounts and the funds that are amassed reflect
the experience of those accounts rather than that of the company.
Typical account choices are: common stock, bond, mortgage
or money-market accounts. If the value of the accounts increases or
decreases amount gets accumulated. More over this kind of annuity is
more risky to the contract owner than fixed annuities, but has an option
of greater returns. Other types of deferred annuities merge the characteristics
of fixed as well as variable annuities. At times annuities are sold
as substitute to investment vehicles such as certificates of deposit,
money market accounts, mutual funds, etc.
There may be differences too. While purchasing this
product, you should bestow with your investment and tax advisor previous
to making any decisions. An amount that gets equal to the amount has
been mounted up will be paid to your beneficiary if you die during the
accumulation phase. There may be surrender charges that gets deducted
from the accumulation value. The amount you receive is usually referred
to as the cash value. It is unusually a better idea to purchase a deferred
annuity unless you are planning to keep it for more than few years.
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