Annuities are one of the best retirement planning tools that offer unique benefits to senior citizens. In simple words, an annuity is a promise for one party to pay a stream or series of payments to another party in return of premium. Normally two parties- an insurance company and annuitant are interested in an annuity contract.
“A contract or agreement by which one receives fixed payments on an investment for a lifetime or for a specified number of years.”

Annuities can be classified into various categories. On the basis of purpose of the investment, annuities can be deferred or immediate. Deferred annuities are best to choose if your retirement is after ample of years. It is great way to build up sufficient funds for retirement. Deferred annuities are not suitable for short term wealth hoarding purposes. The earnings of the deferred annuities are not subject to any tax beFor annuitants start to take out their money.

It is wise to invest in immediate annuities if you are just going to retire. Immediate annuities provide guaranteed flow of income for the rest of life and for a period opted by annuitant. The holder of immediate annuity makes one-time payment, and distributions start within a month. Annuitants also have a good option to convert deferred annuity into immediate annuity. Both deferred and immediate annuities can be fixed or variable. On tax status basis, annuities can be categorized as qualified or nonqualified annuities. Qualified annuities are used to fund tax-qualified retirement plans and non-qualified annuities are applied to support cash accumulation programs that do not qualify for tax deduction.

On the basis of nature of the investment, annuities can be fixed or variable. Holders of fixed annuities receive an assured rate of interest for a certain period of time, such as one, three or five years. After this specific period of time, interest rate is determined for the following period. Fixed annuities are alike Certificates of Deposits in which both interest and principal are guaranteed. On the other hand variable annuities offer variety of investment options like investing funds in stocks, bonds and money market instruments. Rate of interest and principal amount of variable annuities depends on the functioning of the underlying investment.

For more information on annuity options please call the AnnuityForLife.com experts toll-free at 1-888-261-6237