2007-03-15 12:04:54 · 4 answers · asked by runner1 6 in Business & Finance ➔ Investing
A contract sold by an insurance company designed to provide payments to the holder at specified intervals, usually after retirement. The holder is taxed only when they start taking distributions or if they withdraw funds from the account. All annuities are tax-deferred, meaning that the earnings from investments in these accounts grow tax-deferred until withdrawal. Annuity earnings are also tax-deferred so they cannot be withdrawn without penalty until a certain specified age. Fixed annuities guarantee a certain payment amount, while variable annuities do not, but do have the potential for greater returns. Both are relatively safe, low-yielding investments. An annuity has a death benefit equivalent to the higher of the current value of the annuity or the amount the buyer has paid into it. If the owner dies during the accumulation phase, his or her heirs will receive the accumulated amount in the annuity. This money is subject to ordinary income taxes in addition to estate taxes.
2007-03-15 12:12:21 · answer #1 · answered by Faye H 6 · 1⤊ 0⤋
Variable Annuities: Great for the broker, not so great fo 90% of the people that buy them.
Fixed Annuities: Can be a good idea for a limited number of people. Mostly very conservative investors looking for "yield" in a guaranteed instrument with limited tax advantages.
BTW: Guaranteed usually means by the Insurance Company (if they go out of business.... good luck!)
General rule: Never buy "investment" products from Insurance Companies & Banks..............................
2007-03-15 12:41:09 · answer #2 · answered by Common Sense 7 · 0⤊ 0⤋
An annuity is a way of getting a stream of income off a lump of money.
The money is typically held by an insurance company and they effectively gamble on how long you are likely to live. You get so much a month until you die. If you live long, you win. If you die early, you lose.
It's actually more complicated than this :=) but it pays to do your own research. There are a number of ways in which this can work and here's a website with some information which may help to answer your question.
Good luck!
2007-03-15 12:18:19 · answer #3 · answered by Anonymous · 1⤊ 0⤋
Its a financial instrument that pays a fixed amount (fixed annuity) or a variable amount (variable annuity) for a certain period of time.
2007-03-15 12:09:18 · answer #4 · answered by Anonymous · 0⤊ 0⤋