Consumers purchase annuities to protect themselves from running out of income during their lifetime. When selecting an annuity care should be taken to decide at what point in time that income is desired. There are two possible choices for consumers to make: Immediate or Deferred.
Immediate annuities are a good choice for consumers that wish to receive monthly, quarterly, semi-annual or annual income beginning at the time of purchase. The contract owner, or annuitant, purchase this type of annuity when he or she desires income on a regular basis beginning within a month, quarter or year.
Deferred annuities are best for “saving” money for future needs. Deferred annuities are set up so that the funds invested in this annuity grow and compound tax deferred for an undetermined period of time. At some point in the future, the annuity owner can annuitize, or begin to take income from, the annuity through a series of withdrawals.
The person that can take out income from the annuity will be specified in the annuity contract made at the time of purchase. The contract owner owns the annuity. In the majority of cases the contract owner is the person that put up the finds for the annuity. The annuity contract is made between the insurance company or carrier, and the contract owner or annuity buyer.
Annuities, because they are insurance products, also contain a death benefit which is important to consumers because then they can leave the funds to an heir, or heirs, in case something happens to them, and they are unable to enjoy the income created by the purchase of their annuity.
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