Annuities from Sedona Benefits
An annuity is any investment product that pays on a scheduled basis over a set amount of time, in particular, a retirement investment that offers tax deferral on growth, but not on contributions. Tax-Deferred means an investment in which some or all taxes are paid at a future date, rather than in the year the investment produces income. Tax-deferred investments in particular refer to retirement accounts that allow deferral of taxes on contributions, growth, or both; taxes are not paid until withdrawal of funds during retirement.
Annuities are sold by insurance companies, but are decidedly different from an insurance policy. In essence, you buy an annuity in exchange for a series of payments that are distributed at specific points of the life of an annuity contract. Many annuities have an indefinite payout schedule; the longer you live, the more you receive.
Not surprisingly, annuities come in various types. First, you can choose whether you want to receive payments right away or put them off until later. This is the primary difference between "immediate" and "deferred" annuities. Additionally, you can choose between a fixed annuity and a variable product. A fixed annuity has an established payment that the company usually announces on an annual basis. By contrast, a variable annuity is effectively an insurance product wrapped in a mutual fund.
You as the owner of the annuity can choose how your annuity funds are invested. Your choices include stocks, bonds and money markets. It has a set payment amount that may be augmented by additional payments depending on how the annuity's investment portfolio has performed.