Introduction To Annuities
- Date: 2007-05-11 - Word Count: 417
Share This!
Insured investments are an important part of any financial plan. An annuity is one such aspect.
An annuity is a legal contract whereby one party pays in a lump sum of money to another and receives regular payments in return over an extended period of time. There are several various types of annuities, but the basic idea remains the same. Annuities are a deferred investment contract. They are a financial instrument that is sold by the same companies that sell life insurance policies.
In some ways, the annuity is like a life insurance policy in that the risks and uncertainties are transferred from the insured to the insurer. The insurer reduces his own risks by pooling a large number of annuities. One of the common examples of an annuity is the deferred payments after winning a lottery. The lottery winnings can be paid out in a lump sum or spread over a number of years with equal guaranteed payments. The equal payments are in the form of an annuity.
Another use of annuities is after the roll over or distribution of a retirement plan. The lump sum can be used to purchase an annuity that continues to pay a set amount of money on a monthly or yearly basis for the remainder of the owner's lifetime. In some cases, the payouts can continue after death to a designated beneficiary.
An annuity can also be used as an investment tool for retirement planning. The Internal Revenue Service limits the amount of money that can be put into tax deferred retirement plans like a Roth IRA. If a person has extra cash or income and is seeking a long term investment beyond the limits of his retirement plans, the purchase of an annuity can be a very attractive option. Knowledge of the types of annuities and how they can be used in formulating a successful personal financial plan can be a valuable asset in making long term financial game plans.
The Insurance Company invests the annuity funds in a wide variety of different investments. The idea of "pooled" annuities gives the Companies a large amount of investment capital that can be used to generate a profit and cover the payouts that are due to the owners of the annuity. The payments begin at a specified time called the annuitization date. The owner of the annuity is called the annuitant. Although they are not as well known as Individual Retirement plans, the annuity is one of the most attractive long term investment opportunities available.
An annuity is a legal contract whereby one party pays in a lump sum of money to another and receives regular payments in return over an extended period of time. There are several various types of annuities, but the basic idea remains the same. Annuities are a deferred investment contract. They are a financial instrument that is sold by the same companies that sell life insurance policies.
In some ways, the annuity is like a life insurance policy in that the risks and uncertainties are transferred from the insured to the insurer. The insurer reduces his own risks by pooling a large number of annuities. One of the common examples of an annuity is the deferred payments after winning a lottery. The lottery winnings can be paid out in a lump sum or spread over a number of years with equal guaranteed payments. The equal payments are in the form of an annuity.
Another use of annuities is after the roll over or distribution of a retirement plan. The lump sum can be used to purchase an annuity that continues to pay a set amount of money on a monthly or yearly basis for the remainder of the owner's lifetime. In some cases, the payouts can continue after death to a designated beneficiary.
An annuity can also be used as an investment tool for retirement planning. The Internal Revenue Service limits the amount of money that can be put into tax deferred retirement plans like a Roth IRA. If a person has extra cash or income and is seeking a long term investment beyond the limits of his retirement plans, the purchase of an annuity can be a very attractive option. Knowledge of the types of annuities and how they can be used in formulating a successful personal financial plan can be a valuable asset in making long term financial game plans.
The Insurance Company invests the annuity funds in a wide variety of different investments. The idea of "pooled" annuities gives the Companies a large amount of investment capital that can be used to generate a profit and cover the payouts that are due to the owners of the annuity. The payments begin at a specified time called the annuitization date. The owner of the annuity is called the annuitant. Although they are not as well known as Individual Retirement plans, the annuity is one of the most attractive long term investment opportunities available.
Related Tags: money, insurance, life, tax, taxes, coverage, annuities, annuity, payments, insured
Read more annuity information at UFCAmerica.com. Your Article Search Directory : Find in Articles
Recent articles in this category:
- Personal Finance & The Needed Momentum
Possession of personal cash flow plan and the dream of having financial freedom might make it harder - Need An Ebt Card Or Food Stamps?
Applying for food stamps can be a very overwhelming and embarrassing task. Knowing what to expect th - Quick Money Loans What You Should Know
If you are looking for a quick money loan there are a few sources available, and just like any other - Same Day Cash Loans - Quick Help When Fiscal Requirements Force You
Life of human being is completely dependent on cash that establishes the life of one comfortable or - Unemployed Loans - Don't Accept Debacle Against Fiscal Requirements
In today's time, what imperative complication is increasing at the rapid pace for people? It is the - Get A Secured Credit Card To Rebuild Your Credit
The recession has spoiled the financial plans of many. Some have maxed their credit cards out, other - Ways To Create Profitable Cfd Trading Strategies
Understanding the connection between 2 significant ratios is the key to having winning CFD trading s - Can I Save Money At An Outlet Store?
Everyone loves to know they are getting a good deal when they are shopping for something. It could b - Used Car Donation Program Worth The Cause?
Used car donation program may not be the best option for many. Before you call me selfish and Paroch - Who Controls A Business's Asset When It Files For Bankruptcy?
Individuals who wake up and find themselves knee deep in debt, with no recourse to repay the debt, h
Most viewed articles in this category:
- Proposed Changes to Bankruptcy Law in Scotland
A bill has been proposed in Holyrood, the Scottish Parliament, which would align Scotland’s ba - How To Create Your Own Emergency Fund
Do unexpected car repairs, quarterly insurance payments or unexpected medical bills find you hard pr - How To Make A Personal Budget
There are many types of budgets that people use in their daily life. For instance, there are budget - Easy Cash Loans To Meet Immediate Cash Need In The Most Convenient Way
A financial crunch can happen to anyone at anytime in life. A few years back, I was stuck in the sam - Credit Counselors Offer Advice to Avoid Debt This Christmas
The holiday season is a great time of year for most of us, but it's also a time of year when we want - Save More/Spend Less - Become a Saver not a Spender
Our personality and lifestyles affects our ability to save. Most every action we take (including tho - Saving Money In College
Have you ever found yourself eating Cheerios for dinner while sitting in your dorm thinking about ho - Seek Unsecured Loans And Avoid The Threat Of Repossession
It is quite natural that people don't want to have the threat of repossession of their property whil - Investing - Tax Shelters Equals Big Fine For KPMG
What happens when a world renowned accounting firm decides to market tax shelters to its elite clien - Teaching Kids to Save--It's More Than Just Numbers
Did you know?<b>• The fastest growing group of bankruptcy filers is those 25 and you
