Fixed Annuity
A fixed annuity is the most common type of annuity. Basically, you give an insurance company a lump sum of money (either saved over a period of time or in one lump sum) and in exchange, the insurance company pays you a fixed income each month for a specific period of time.
If you are doing a single premium immediate annuity (one lump sum payment of funds to the insurance company) the payments begin right away. If you are doing a single premium deferred annuity (monetary payments to the insurance company over a period of time, sort of a savings account, or can also be done as a lump sum payment) the payments begin at the date of your choosing (usually your retirement date) or a date chosen based on when your savings period is over.
Fixed annuities
Fixed Period
You can choose a specific period of time, for example 15 years. This means that you will receive payments for 15 years, and if you pass away before that time period, your beneficiaries will receive the payments until the final payment date. These payments are usually comprised of both interest and principal. If you chose deferred payout instead of immediate, the investment grows as years pass, with taxes deferred on the growth.
Annuitize
This means that you want to receive payments until your death. When you pass away, your beneficiaries do not receive anything. It doesn’t matter if the payments are made for one month or 50 years – they stay the same until the investor passes away. This is optional for investors and is most often sold by insurance companies that are experienced in determining how long an investor (or sometimes known as the annuitant) will live through statistical probability.
Fixed annuities sometimes have surrender provisions that will prevent you from withdrawing money from the annuity for five, 10 or some other number of years. While it depends on the insurance company, some allow you to access your investment, which usually means that the investor can withdraw up to 10 per cent of the principal. Some annuities will have hardship clauses that allow you to withdraw the investment with no surrender charges in some situations, so be sure to discuss this fine print with the insurance agent or broker before signing on the dotted line.
Annuities offer a distinct stability to your retirement years. However, you should compare fixed annuities to other annuity programs and other retirement programs to be sure that you are getting the right product for you – one that will fit your needs now, and in the future when you retire.
Annuities
Health Savings Accounts
You can use this account to pay for your qualified health expenses, including expenses that the plan ordinarily doesn’t cover, such as eyeglasses and hearing aids.
Expenses paid out of the HSA that are eligible expenses under your high-deductible health plan will count toward the plan’s deductible.
