What are Annuity Investments and How Do They Work?

What are Annuity Investments and How Do They Work

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An annuity investment is set up to meet specific financial expectations and needs. For example, large sums of money which are received through winning the lottery, through an inheritance, or through a lawsuit can be set up to meet financial needs for now while the sum of money continues to grow in value. Growing your money is a wise choice. It is proven that many people who receive a large inheritance or a large winning spend the entire amount frivolously within a short amount of time. You can protect your large sum of money through investing in an annuity. Through an annuity plan the money can be spent through a steady stream of income or it can be deferred until a later time in life.

An annuity is made available through insurance companies as a means of investment. They are two types of annuities which provide long-term security for a large sum of money. These two investments are: a fixed annuity and a variable annuity.

A fixed annuity is designed to provide the investor with monthly payments which are designated to be dispersed during a certain period of time or over a certain period of years. For example a large sum of money can be dispersed through monthly payments over a five-year, 10 year or 20 year annuity plan. The money can also be deferred until later in life and can be dispersed through monthly payments during their retirement years. This type of investment can also be dispersed to heirs through a steady stream of monthly income. A fixed annuity investment is beneficial as it preserves the large sum of money and it allows the money to grow in value while it is still being utilized through monthly payments.

The variable annuity is designed to provide the investor with a beneficial tax deferral on the earnings of the lump sum of money. A variable annuity will provide lifelong payments based on life expectancy and it additionally provides an insurance guarantee for provision of these payments. This type of investment allows the lump sum of money to continue to grow through stock and bond investments while it is being utilized through a lifelong payment system. The remaining financial balance can be named to beneficiaries at that time investor's death.

Both fixed and variable annuities are designed to protect large sums of money from frivolous spending sprees. They also provide tax deferral options rather than immediate tax payouts. They offer an excellent option for saving money while enjoying a steady stream of income. Annuity plans provide financial options that create steady streams of income for large sums of money.

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