What Are Annuities And How Do They Work?

What are annuities and how do they work? Many types of annuities play into the retirement planning process. There is just unbelievable number of different annuities in the market place today and they serve...

There is just unbelievable number of different annuities in the market place today and they serve a lot of different purposes. At Merrill Lynch, we typically look at annuities to the supplement some kind of retirement need and that's really their core purpose. So we also use them in other state planning and I will just say overall financial planning using it. But typically an annuity is where you turn money over to an insurance company. You have the additional protection or rapport from an insurance company to help protect the assets or to help in the overall growth of the assets. But there are a number of annuities, fixed annuity, variable annuity and immediate annuity. It can be a big supplement in the overall retirement process. I would say the younger you are and let's say 50 years to 60 years maybe its more common to look at variable annuities where you have the opportunity to grow your funds in the stock market. Fixed annuities are a fixed amount provided by the insurance company who takes your dollars and will most likely invest in a well thought out investment plan to provide some fixed rate of amount for it. That would have to do with your risk tolerance and your overall retirement goals and retirement needs. I will say real quickly, there is also immediate annuity where you may have a sum of money and the best decision for you or you and your family is to get some income for some period of time and that's where you turn to. You actually turn the money over to the insurance company and the insurance company would then provide you with a stream of income either a period of time or your lifetime depending on what you chose and you don't have the concerns of what happens with the investment.

© High Speed Ventures 2011