Indexed Annuities Vs. Variable Annuities Vs. Fixed Annuities

What is the difference between indexed annuities

, variable annuities and fixed annuities? Before we go on to answer that question, let's briefly explore what exactly annuities are about. Whenever an insurance provider makes a contract agreement with you for them to submit a series of payments or a lump sum to you at any given point in time, in exchange for your immediate purchase or payment is known as an annuity. This is a unique kind of insurance company that makes it a goal to meet your long range financial goals, which can include retirement. Under this particular contract, indexed annuities, variable annuities and fixed annuities will require that you make either a series of payments or a lump sum of payments. The insurance provider in return will then submit period payments to you at the beginning of the contract or at some given point in the future.

Most annuities make your earnings tax-deferred during the growth stage of your account. You will not be paying any taxes on the annuities during this period. There may also be death benefits included with the annuity. Payments will be paid to a beneficiary, such as your spouse or family members. However, whenever there are any withdrawals done on the annuity, then the gains in that account will be taxed. The rates for taxation will depend on current tax rates for income. Early withdrawals may also subject you to hefty surrender charges and taxation penalties.

Fixed Annuities

Individuals who are not fully participating in the current workforce can help to get more stability to their income from certain investments. This is great for individuals who are retired or about to retire. These annuities can offer you a specific amount of income to be paid at regular time intervals until a period of time has ended. There are both disadvantages to this and certain advantages.

Indexed Annuities

These kinds of annuities will yield returns that are based on the S&P 500 SPI. In essence, this is a kind of annuity that brings returns on your investments on a selected equity-based index. You can buy these annuities from an insurance provider. The conditions and terms associated with the payments are going to depend on the original contract. These are a little more risky than fixed.

Variable Annuities

Variables let you select from a wide range of investment options. The returns will depend on the performance of those investment options. With variables, there are higher risks. You could end up investing in a mutual fund that did not perform as you'd hoped. You could end up losing money. On the other hand, you could end up winning big. The returns could be higher than hoped, helping you and your family to have a comfortable life style. So there you have it, the difference between fixed, indexed, and variables are laid out in front of you. This will no doubt help you to understand the differences and how you can benefit from them. Each of them can provide you with advantages and disadvantages.

by: Sachin Kumar Airan

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