Annuity Types  

1.   Fixed Annuities offer a stable, fixed return for a pre-set term. The terms are normally for 3-7 years. 

There are two types of fixed annuities

1. Traditional fixed annuity

2. CD type annuity (multiple year guarantee annuities)

Traditional fixed annuities lock the interest rate for a portion of the term and change the rate later whereas, cd-type annuities keep the rate the same for the entire term. 

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2.   Index Annuities allow you to earn a portion of the gains in market indexes without losing money when indexes decline. If markets decline you are credited with 0% instead of a loss. You earn some of the upside with none of the downside. 

Over longer periods of time index annuities usually earn more than fixed annuities or bank cd's but less than investing in the market directly.  Investors earn a reasonable rate of return and don't risk their principal. 

4.  Immediate Annuities also known as "income annuities" allow you to take a sum of money and turn it into an immediate source of income. 

They pay a series of guaranteed payments as long as you live. Immediate annuities are easy to understand because you know up front what you will receive. They also have no fees.

3.  Variable annuities allow you to invest in subaccounts which are directly tied to stocks, bonds, and other asset classes. The performance of your annuity depends on the performance of the subaccounts you select. 

Variable annuities offer the potential for greater returns but also have greater risk. Values change daily and your principal goes up and down.  Tip - be careful of fees. Some variable annuities have total fees of 3-4% per year. 

5.  Longevity annuities also known as "deferred income annuity" or "DIA's" allow you to take a sum of money and turn it into a future source of money.  

Example : A 65 year old could invest a lump sum and begin receiving income when they turn 80 or 85. 

Longevity annuities are known to produce the most retirement income for the least amount of dollars and are an ideal way to ensure you don't run out of money in your later years. 

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