<img src="//bat.bing.com/action/0?ti=5464437&amp;Ver=2" height="0" width="0" style="display:none; visibility: hidden;">


One of the most common questions we are asked about is how annuities work? An annuity can be thought of as a long-term investment to increase your income stream later on in life. Unlike other investments, though, an annuity is backed by an insurance company so there are few risks. It is a contract between an investor and the insurance company offering the product, and the stipulations of the contract can be negotiated based on the investor’s needs.

The key benefits of owning an annuity are that it is a relatively safe investment, provides long-term financial security, doesn’t require the owner to pay taxes until they start receiving payments, and cannot be divvied in probate. However, there are a few downsides that you must consider as well. First, you are locked into the contract, meaning you can’t ask for your payments sooner in the event that there is an emergency and you need cash right away. Second, some critics have argued that annuities can be expensive for the return they provide. They argue there are other investments that offer a better return on your investment. You might also be bound by the IRS rules for Required Minimum Distribution (RMD).

What Types of Annuities Are Available?

There are many different types of annuities out there as terms can be negotiated based on the investor’s individual needs. Negotiations could include when the payments begin, how long they last, whether there is a beneficiary, and how payments are calculated. The most common types of annuities include the following:

Fixed Annuity: The payments are determined before the contract is signed. They offer the lowest rate but also carry the least risk.

Variable Annuity: The payments are based on the performance of the investment portfolio. An investor may able to purchase a living benefit income rider to reduce risk.

Indexed Annuity: This is a hybrid of fixed annuities and variable annuities and offers more potential return than a fixed annuity, but carries less risk than a variable annuity.

Call to Action

Selling an Annuity

Although you cannot get your payments early, you may be able to sell your annuity for cash if you are in need of it right away. SellAnyAnnuity.com partners with annuity buyers on the secondary market that will offer the best value for your annuity. You have the option to sell some or all of your annuity payments depending on your individual needs. Contact us today to learn more about the process of selling your annuity and to receive a free quote.

Learn More