What kind of annuity

They typically offer a guaranteed minimum income benefit, and the chance of principal upside pegged to a market-based index. A drawback is that upside potential is limited by a so-called participation rate, caps or a spread — all methods in which your return in a rising stock market is trimmed.

Consequently, buyers of these annuities never keep pace with a robust market. These appeal to retirees and pre-retirees who want to conservatively participate in potential market appreciation without fuss and with downside principal protection. These are basically a mirror image of a life insurance policy. Instead of paying regular premiums to an insurer that makes a lump-sum payment upon death, the investor gives the insurer a lump sum in return for regular income payments until death, or for a specified period of time, typically starting one to 12 months after receipt of the investment.

Payments are typically higher than other annuities because they include principal, as well as interest, and so also offer favorable tax treatment. These are popular among retirees and pre-retirees who need a higher-than-average stream of income and are comfortable sacrificing principal in exchange for higher lifelong income.

These delay payments until a future date greater than one year. They enable people to increase their income stream later in life for less money because the insurance company is not on the hook as long when income payments are deferred.

These appeal to people who want guaranteed income in the future, not now, or who want to create a ladder of income over different periods later in life. For example, they may want to work in retirement but know that eventually they will stop working and, at that point, and not before, will need guaranteed income from an annuity.

Visit the deferred income annuities section to learn more. Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website.

These cookies do not store any personal information. Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website. Call Us. Five Basic Types of Annuities There are five major categories of annuities — fixed annuities, variable annuities, fixed-indexed annuities, immediate annuities and deferred annuities.

Learn more about fixed annuities. Get quotes and learn more about immediate annuities. Annuitant The person, usually the contract owner, to whom an annuity is payable and whose life expectancy is used to calculate the income payment. Annuitization The conversion of the annuity principal to a higher, often lifetime income stream.

Beneficiary A person or persons who receive payments in the event of the death of the annuitant. Contract Fee An annual fee, among others, paid to the insurance company for administering the annuity.

Lincoln products are not a deposit nor FDIC-insured, may go down in value, and are not insured by any federal government agency or guaranteed by any bank or savings association. Safely grow and protect your future income from loss. Get more growth potential for your future income with full protection from loss. Keep your savings growing in the market with protection for your future income.

Provides a predictable way to help grow and protect your savings, then helps you enjoy a protected source of income for life.

Gives you options to keep your income growing with full protection from loss before enjoying protected income for life. In order to deliver that return, the insurer invests money in safe vehicles, such as U. Treasury securities and highly rated corporate bonds. While safe and predictable, these investments also deliver unspectacular returns. Even so, fixed annuities can be a good fit for people who have a low tolerance for risk and don't want to take chances with their regular monthly payouts.

With a variable annuity , the insurer invests in a portfolio of mutual funds chosen by the buyer. The performance of those funds will determine how the account grows and how large a payout the buyer will eventually receive.

Variable annuity payouts can either be fixed or vary along with the account's performance. People who choose variable annuities are willing to take on some degree of risk in the hope of generating bigger profits. Variable annuities are generally best for experienced investors, who are familiar with the different types of mutual funds and the risks they involve.

If an annuity buyer is married, they can choose an annuity that will continue to pay income to their spouse should they die first. Annuities can also be either immediate or deferred , in terms of when they begin to make payments. The basic question buyers need to consider is whether they want regular income now or at some future date.

As with fixed and variable annuities, there are some trade-offs. A deferred payment allows the money in the account more time to grow.

And much like a k or an IRA , the annuity continues to accumulate earnings tax-free until the money is withdrawn. In annuity jargon, this is known as the accumulation phase or accumulation period. An immediate annuity is just what it sounds like. The payouts begin as soon as the buyer makes a lump sum payment to the insurance company. Deferred annuities and immediate annuities can both be either fixed or variable. There are some other important decisions to make in buying an annuity, depending on your circumstances.

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