We defined what a lifetime annuity is on our previous post, however, a lifetime annuity takes on different forms. Keep reading to learn more.
There are two main types of lifetime annuities: fixed and variable.
In a fixed annuity the insurance company guarantees the principal and a minimum rate of interest. In other words, as long as the insurance company is financially sound, the money you have in a fixed annuity will grow and will not drop in value. The growth of the annuity’s value and/or the benefits paid may be fixed at a dollar amount or by an interest rate, or they may grow by a specified formula.
in a variable annuity, it is invested in a fund—like a mutual fund but one open only to investors in the insurance company’s variable life insurance and variable annuities. The fund has a particular investment objective, and the value of your money in a variable annuity—and the amount of money to be paid out to you—is determined by the investment performance (net of expenses) of that fund. Variable annuities are regulated by state insurance departments and the federal Securities and Exchange Commission.
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