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An annuity is a financial product that provides a guaranteed income stream for a specified period or lifetime. There are two main types: deferred annuities where payments are made over time before receiving income, and immediate annuities where a lump sum payment starts income immediately. Annuities offer benefits like guaranteed income, tax benefits, and death benefits, but also have drawbacks like high fees, lack of flexibility, and complex terms.

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23 views2 pages

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An annuity is a financial product that provides a guaranteed income stream for a specified period or lifetime. There are two main types: deferred annuities where payments are made over time before receiving income, and immediate annuities where a lump sum payment starts income immediately. Annuities offer benefits like guaranteed income, tax benefits, and death benefits, but also have drawbacks like high fees, lack of flexibility, and complex terms.

Uploaded by

Felyn Roseann Areta
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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An annuity is a financial product that provides you with a guaranteed income stream for

a specified period of time or for the rest of your life. You can purchase an annuity with a
lump sum of money or with a series of payments.

There are two main types of annuities:

 Deferred annuities. With a deferred annuity, you make payments to the insurance
company over a period of time, and then start receiving payments at a later date.
The payments can be for a fixed period of time or for the rest of your life.
 Immediate annuities. With an immediate annuity, you make a lump sum payment
to the insurance company and start receiving payments immediately. The
payments can be for a fixed period of time or for the rest of your life.

Annuities can offer a number of benefits, including:

 Guaranteed income stream. Annuities provide you with a guaranteed income


stream, which can help you to protect yourself from outliving your savings.
 Tax benefits. Annuities can offer tax benefits, depending on the type of annuity
you choose.
 Death benefits. Annuities can provide death benefits to your beneficiaries, even if
you die before you start receiving payments.

However, annuities also have some drawbacks, including:

 High fees. Annuities can have high fees, which can reduce your returns.
 Lack of flexibility. Once you purchase an annuity, you may not be able to change
your mind or get your money back.
 Complex terms. Annuities can be complex, and it is important to understand the
terms of the contract before you purchase one.

If you are considering purchasing an annuity, it is important to speak with a financial


advisor to get personalized advice.

Here are some examples of annuities:

 Fixed annuity. A fixed annuity pays you a fixed income stream for a specified
period of time or for the rest of your life. The interest rate on a fixed annuity is
guaranteed, so you know how much money you will receive each payment.
 Variable annuity. A variable annuity pays you an income stream that is linked to
the performance of a specific investment, such as a stock market index. The
amount of your payments will fluctuate depending on the performance of the
investment.
 Indexed annuity. An indexed annuity is a hybrid of a fixed and variable annuity.
Your payments are guaranteed to be at least a certain amount, but they can also
increase if the investment underlying the annuity performs well.

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