Fixed annuities are a common investment among retirees. An annuity is a contractual investment through an insurance company offering the investor certain assurances. There are three ways in which an annuity can be defined:
For investors, the biggest selling points of an annuity are tax-deferred growth and certain guarantees. Generally, the biggest distinguishing factor is whether the annuity is fixed rate of variable.
Some annuity characteristics
Annuities can be set up as either qualified or nonqualified. A qualified annuity is used for retirement plans and they are usually funded with pre-tax dollars. A non-qualified annuity is one that is funded with after-tax dollars and can be purchase by pretty much anyone.
Annuities are a fantastic risk management tool allowing the investor to meet certain needs or increase their likelihood, because of their underlying guarantees.