Annuity Plan Definitions & Opportunities

Visit the "Annuity Carrier" page for a list of Annuity Providers and the types of plans they offer.

BenefitPlace also offers a link to - BP Trade Show. At this show you can gain access to Plans, Programs, & Services offered by Carriers and Brokers who are Exhibitors.

What are Annuity Plans? Annuity Plans provide a guaranteed source of income during retirement. In the simplest form, you pay an Insurance Company a lump sum of money, or installments, in exchange for a guaranteed payout for life - or for a predetermined period of time. An annuity can also be a method of accumulating a lump sum of money through a series of regular and equal payments. To annuitize a sum of money accumulated within the annuity is to convert the sum into a series of regular and equal monthly retirement income payments.

Their are a number of categories and types of annuities to meet different needs. It is important to select the Annuity Plan that best serves your and your family's needs. The following are basic categories and types:

      When the Annuity Pays?
          1). Immediate Annuity - Pays income immediately for a certain period of time or for as long as you live.
          2), Deferred Annuity - Pays a fixed income after a certain period of time. This annuity offers a Death Benefit. In the event of your death, the annuity income is paid to your heir including any investment income that the annuity accrued.

      Types of Contracts
          1). Fixed Annuity - pays you a fixed income each month from the time that you decide to start receiving the money. The rate of return or the money that you will receive each month is pre-determined and does not change. The money saved and invested grows on a tax-deferred basis.
          2). Variable Annuity - The Insurance Company invests your money in stocks and bonds. The income you receive from the investment in the annuity is subject to changes each month depending on fluctuations in the stockmarket. Your income grows on a tax deferred basis. You can decide whether to get returns immediately or on a long term basis - a Variable Immediate Annuity or a Variable Deferred Annuity.

    How You Receive Your Annuity Income?
          1). Life / Straight Annuity - You are paid income form the annuity for your entire life. It should be noted that if you die before the money in the annuity runs out, in some cases, your heirs or dependents will receive no residual money.
          2). Joint and Survivor Annuity - You are paid income from the annuity for as long as you live and the designated survivor beneficiary is paid income for a fixed number of years, or in come cases, for as long as they live.
          3). Refund Annuity - You are paid by the annuity for as long as you live, and if you die, and have not received all the payments that were due to you in lieu of the premiums you have paid, your beneficiary or dependent may receive income you did not receive.

     Specialized Types of Annuities
          1). Two-Tiered Annuities - is one that has different values available for a distribution at maturity depending on whether the income is taken by the Policyholder as a lump sum or left with the issuer to make periodic payments. Given the complexity of the choices, some states do not permit agents to sell two-tiered annuities.
          2). Tax-Sheltered Annuities (TSAs) - School Systems and tax-exempt organizations often offer TSAs to Employees to set aside funds for retirement. Employee contributions to the TSA plan are excluded from their current taxable income. The plan must be established by the Employer and the contributions must be used to purchase annuity contracts or mutual funds. Payments received from the TSA at retirement are generally taxable to the recipient as ordinary income.
          3). Retirement Income Annuities - is a Deferred Annuity with the addition of a Decreasing Term Insurance Rider that provides Term Life Insurance with a face amount that decreases each year the policy is in force. When you reach the retirement age, the decreasing term insurance death benefit expires and the annuity payments begin providing income for retirement.   If you die before retirement, the decreasing term insurance death benefit is combined with the current value of the annuity and is paid to the annuitant's beneficiary - settlement options are available.
          4). Equity Indexed Annuities (EIAs) - are Fixed Annuities with both a guaranteed minimum interest rate and a guarantee against the loss of principal. What differentiates EIAs is that any interest credited that is in excess of the minimum guaranteed rate is linked to the value of a designated equity index such as Standard and Poor's 500 Stock Index. If the index goes up, the annuity interest rate would correspondingly go up - generally with a cap. If the index goes down, the annuity interest rate would correspondingly decrease but never below the guaranteed minimum.
          5). Market-Value Annuities (MVA) - are similar to EIAs. The MVA is also a Fixed Annuity product with a market-driven feature. Instead of having the annuity's interest rate linked to an index, the interest rate remains fixed. The market-value adjustment only takes effect if the contract is surrendered prior to the contract period expiration. Because MVAs expose the consumer to investment risk, they are classified as securities and agents must be registered with FINA (Financial Industry Regulatory Authority), formerly known as the NASD (National Association of Securities Dealers).

BenefitPlace recommends that you find a qualified and experienced Broker or Financial Planner who specializes in Annuities to assist in the decision-making process.