Variable Annuities

Category: Finance, Insurance.

Annuities are gaining a lot of publicity nowadays, as viable means of investment for people after their retirement.

These packages are bought by insurance companies, annuities are sold, and in return to the retirees. When people retire, they get some packages from their employers for their long years of service and dedication to the company. These annuities will pay the retiree a fixed sum on a monthly basis. There are two different types of annuities that need to be considered here. After a specified period of time, known as the surrender period, the annuity will get matured like an ordinary insurance policy, and that is when the retiree can take back the annuity amount. The following are descriptions of these types, which will help you in doing the annuities reviews when the time comes. As the name suggests, the fixed return annuities pay out at a fixed rate per month.

Fixed Return Annuities. The rate of return is pre- decided when the annuity is purchased, and that rate will remain fixed until the surrender period. Then, fixed return annuities have the benefit of tax- deferred payments. Annuitants like the security of a fixed return rate, so that they can manage their expenses in a much better manner. As long as the annuity is not withdrawn, it will not be subject to any tax. Money that would otherwise get deducted for tax will remain with the annuitant till the annuity is surrendered at the end of the term.

That is a great advantage for tax- related savings. Fixed return annuities also have death benefits. Variable Annuities. In case the annuitant dies before the annuity is surrendered, then the annuity is given to the survivors of the deceased annuitant, along with any accumulated earnings. Variable annuities are much the same as fixed return annuities. So, in that way, there is no difference between the two kinds of annuities.

They also have features such as death benefits and tax- deferred payments. However, variable annuities differ from fixed return annuities on one important point. Hence, they can take some risks, and using their acumens, they can also make higher returns than people with fixed rate annuities can. People with variable annuities can control where their annuity value will be invested. Variable annuities are much better for people who want to control their own investments and ensure that they get better returns at the end of the day. But while the fixed rate annuities are for the more conservative investor, who wants a fixed return, the variable annuity is for the risk taker, who is confident of using his or her own skills to get better returns.

In conclusion, we can say that both fixed rate annuities and variable annuities are great as post- retirement investments, and both can provide tax- deference and death benefits.

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