Which Type Of Annuity Is Right For YOU?

This is the original type of annuity going back to Roman Times. You give the insurance company your principal, they pay you an income for 5-20 years or for life. Pro: The income rate can be very high with a high degree of reliability and safety  Con: You give up all access to your principal.

"Deferral" means putting off/deferring immediate income. Why? To get a higher rate of income later. Pro: A Deferred Income Annuity (DIA) is built on an immediate annuity chassis, but allows you to put off the income until later--to achieve a higher income without risk, simply by waiting.  Con: Like an immediate annuity, you give up all access to your principal.

This type of annuity has gained significant popularity for IRA rollovers due to the fact that most people want to continue to own their principal AND receive income for life. Pros: You keep control of your principal. You can cash out later if you wish. Your principal grows without market losses according to an index. For lifetime income you can add an income "rider" known as a Guaranteed Lifetime Withdrawal Benefit. This insured feature allows you to receive a lifetime income without annuitizing

Fixed Rate Annuities are straightforward and simple. Currently, rates on the top ranked FRAs run between 5% and just under 6%, locked in and guaranteed for 3 to 10 years. Longer terms tend to pay higher interest. Pro: You can withdraw your interest as you go or let it compound, tax deferred. No management or advisor fees. Con: Like all deferred annuities, an early withdrawal surrender charge applies, allowing the insurance company to pay a higher rate of interest.

FIAs can be used for income replacement or pure accumulation. When used for accumulation, growth is linked to an index, but with no risk of loss. To offset the cost of providing principal protection, the insurance company must mitigate your rate of growth with a "cap" or a "participation rate".

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