what is an annuity?

Answer 1

What equityhaw... Said but

Just a warning. Annuities are all about fees and commissions. They are probably the worst investment product out there. They make sense for very very VERY few people, like 1 in 1000 or less.

Brokers push them for commissions.
Insurance Agents push them for commissions.
like 5,6,7%

Then the company that manages the annuity makes a killing too. The fees are way way too high, did i say way too high.

After I post this some broker or insurance agent is going to try to tell you that I'm wrong and they are a great tool. Beware they make money (lots of money) from them, a sinful amount of money from them. I'd rather pay full price for a new car or let a used car salesmen sell me grandmas car for full price.

Don't believe me? then listen to Suzi Orman. She hates them more than me!

Answer 2

Two different types: Fixed and Variable

Both are insurance products (don't let anyone tell you any differently). The Fixed Annuity offer you the ability to get a fixed percentage of money (say 5%) for a certain period of time (say the rest of your life) in exchange for a lump sum investment. It's a gamble. If you outlive your life expectancy (where the insurance component comes into play) you get more money than you invested. If you die early, you usually forfeit any remaining balance to the annuity company.

A variable annuity is a very confusing product. In a nutshell, it's an investment which usually guantees a certain rate of return no matter what the market does. It usually has investment subaccounts that act like mutual funds. The fees are a varaible annuity are usually very high (and brokers get compensated well on them) and don't make a lot of sense for most people. They prey on the fear of losing money. However, keep in mind the market has never lost money over any 20 year period in history. So are you paying for protection you don't need?

Answer 3

Annuities are contracts that guarantee regular payment to the annuitant. Investment annuities are insurance products that allow the owner (annuitant) to make lump sum contribution or periodic payments into the account until the age of retirement. After a pre-determined number of years, the insurance company will annuitize the contract (making payments to the owner) for either for life, or for a pre-determined dollar amount. Fixed contracts guarantee the returns on a set number of years. Variable annuities work together with mutual fund companies and allow the owner to make his or her own investment selections from the affilated funds. In this case, the annual return is not guaranteed. However, at the end of the contract, e.g., twenty years, the value of the contract determines how much of a single, monthly or annual distribution the insurance company will guarantee to the owner.

Hawk

Answer 4

The term annuity, in current use in the insurance industry, refers to two very different types of legal contracts with very different purposes. Traditionally, for at least four hundred years, the term annuity referred to what is more correctly called today an immediate annuity. ...

In the United States, a form of annuity which provides for the continuation of pension benefits to the spouse of a retired pension plan participant after the death of the participant. The survivor's benefits, which cannot be less than 50 percent nor more than 100 percent of the original benefits, continue until the death of the spouse. This form of annuity is required in United States qualified plans, unless the participant (with consent of the spouse) elects to forego it. ...

Answer 5

Read Hawks answer.

And Hartford has great annuities.

You don't have to annuitize them to get what you want to accomplish out of them either. Just a thought.

Answer 6

monthly or annual fixed income (payment) generated from your investment

Answer 7

monthly or annual fixed income (payment) generated from your investment.