Annuity is the contract between the insurance provider and the client where the client makes either lump-sum payment or a series of payment. In return, you will be receiving regular disbursements beginning at some point in time or immediately, depending on the client’s preferences.

How does it Works?

The primary goal of annuity is providing a steady flow of income, mostly after retirement. The funds accrue on tax-deferred basis. Much like the 401K contributions, it can be withdrawn only when there’s no penalty after 59 ½ years old.

There are numerous aspects for annuity that could be customized to the buyer’s specific needs. Aside from deciding between series of payment or lump-sum payment to the insurer, you may opt when you wish to annuitize the contributions – that’s when you want to begin receiving payments.

Annuity that has started immediately is called as immediate annuity while one that starts at predetermined date in future is referred to as deferred annuity.

Finalizing on the Disbursement Procedure

As per the disbursement duration, it is going to vary. You could decide to receive payments for certain period of time like 25 years or even for rest of your life. Obviously, securing lifetime payments will lower the check you’ll receive. But, this is going to guarantee that you will not outlive your assets, which is among the major goals of annuities.