Annuities
What is an Annuity?
- An annuity is a series of payments made at equal intervals. Examples of annuities are regular deposits to a savings account, monthly home mortgage payments, monthly insurance payments and pension payments. These financial instruments have been used to accumulate funds and provide significant and sudden increases in personal income (via future, lump-sum withdrawals), all while legally avoiding the taxes (e.g., income-, capital gains-, estate-) that would otherwise be assessed on them.
Immediate Annuities vs. Deferred Annuities
An Immediate Annuity is an insurance policy which, in exchange for a sum of money, guarantees that the issuer will make a series of payments. These payments may be either level or increasing periodic payments for a fixed term of years or until the ending of a life or two lives, or even whichever is longer.
A Deferred Annuity is a contract that is chiefly a vehicle for accumulating savings with a view to eventually distribute them either in the manner of an immediate annuity or as a lump-sum payment
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Annuities provide guaranteed income for life