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ANNUITIES are contracts between investors and insurance companies. Annuities are a popular way to save for retirement because they can provide income. There are different types of annuities that offer investors different interest rates and schedule of payments.
FIXED ANNUITIES are very similar to GICs (Guaranteed Investment Certificates) with investment options and terms that range from daily interest accounts to guaranteed terms up to 10 years.
Objective: The primary objective of fixed annuities is to provide investors growth of principal and interest.
Suitability: Fixed annuities are an investment alternative for investors seeking growth of principal for purposes such as retirement planning.
- Guaranteed Interest Rate: Fixed annuities offer a fixed rate of interest guaranteed by the issuer.
- Guarantee of Interest and Principal: The payment of both interest and principal is guaranteed by the insurance company.
- Guaranteed interest income option: Interest is paid out monthly, quarterly, semi-annually or annually.
- Penalty for Early Surrender or Withdrawal: Investors are assessed a market value adjustment charge if you redeem or withdrawal your investment prior to term maturity.
- Avoids Probate: Upon death proceeds are paid directly to named beneficiaries, thus avoiding probate and other estate settlement costs.
LIFE ANNUITIES are contracts between insurance companies and investors. They provide investors and/or their spouses with a guaranteed income for life, no matter how long they live.
Objective: To provide investors with maximum monthly income and/or the certainty they will not outlive their capital.
Suitability: Life annuities are best suited for conservative investors seeking the highest possible after-tax income.
- Regular Income: Regular income can be paid on a monthly, quarterly, semi-annual or annual basis. Investors know exactly how much income they will receive and how long it will last. For life annuities, income will last throughout the life of one spouse or the lives of both spouses.
- Life income: Immediate life annuities can be structured to provide income that cannot be outlived.
- Liquidity: Once an immediate annuity is purchased, it cannot be altered or ceased. The payments from an immediate annuity must be continued as the contract originally stipulated until, when by contract provisions, the insurance company has met all its obligations and the policy is terminated.
- Guaranteed period: You can add a guaranteed period so income payments will continue to beneficiaries if death occurs prior to the end of guaranteed period selected.
TERM CERTAIN ANNUITIES: The insurance company receives a lump sum from the investor and, in return, guarantees to pay the investor a specified amount of money for a specified period of time, such as five or ten years.
Objective: To provide investors with maximum monthly income over a certain period of time.
Suitability: Term certain annuities are best suited for conservative, income-oriented investors.
- Regular Income: Regular monthly, quarterly, semi-annual or annual income is paid on a systematic basis. Investors know exactly how much income they will receive and how long it will last.
- Income Period: Term certain annuities can only provide an income for a certain and predetermined period of time.
- Liquidity: Once a term certain annuity is purchased, it cannot be altered or ceased. The payments from the annuity must be continued as the contract originally stipulated until, when by contract provisions, the insurance company has met all its obligations and the policy is terminated.
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