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An annuity is an investment vehicle sold primarily by insurance companies. There are several types of insurance annuities. Every type of annuity has two essential properties that define it: whether the payout is immediate or deferred, and whether the returns are fixed (guaranteed) or variable. Payments begin to the investor immediately after an immediate payout annuity is purchased, while deferred payout means that the investor will receive payments in the future. An annuity with a fixed return offers a guaranteed return by investing in low-risk securities like government bonds, and is commonly known as a fixed annuity. An annuity with a variable return offers results that vary with the performance of the funds where the money is invested, for example stocks.
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