Here are some important things to know about retirement annuities:
Annuity types
There are several types of annuities but the main classifications include the following:
- pure life annuities: provide payouts for the rest of the retiree's life;
- term annuities: provide payments within a certain period;
- accumulation annuities: intended for the accumulation of capital in order to receive future return;
- indexed annuities: payments increase in line with inflation or other indexes.
Payment order
Annuities can provide payments starting immediately after the contract acquisition (Immediate Annuities) or after some time (Deferred Annuities), when a person reaches retirement age.
Taxation
Taxation of retirement annuities in the US depends on type of annuity, its structure, and source of funds used to fund the annuity.
If annuity is deferred, i.e. payments are made later; the capital gains during the accumulation stage are usually not taxed.
Guarantees
Annuities can offer options that provide guaranteed payouts for a specified period even if the policyholder passes away early.
Investment options
Some types of annuities provide a choice of investment options that may affect future payouts.
Commission and fees
Various commissions and fees may apply when buying annuities, so it is important to carefully study the terms of the contract.
Before purchasing a retirement annuity, it is recommended to consult with a financial advisor or retirement planner for personalized advice tailored to your unique situation and financial goals.
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