What Annuity

What is an Annuity?





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    What is an Annuity?

    What is an annuity? A simple explanation is to say that annuities are investments designed to safely convert pension money into regular taxable income. The most common form of annuity is the Lifetime Annuity which is a safe way to invest pension money because it offers guaranteed income for the rest of your life. It is also possible to purchase annuities for a set period of time with others allowing dependents to benefit from annuity payments after your death.

    In general, the pension money used to purchase annuities comes from a lump sum accumulated through either a personal pension plan or one set up by an employer. However, it is also possible to use money from a savings account to buy an annuity.

    Of course, the amount of money paid out from an annuity depends on a host of factors such as:

     The value of your annuity (how much you purchased it for)
     How large/small the annuity rate is
     How old you are at the time of purchase
     How regularly you decide to get paid
     The annuity options you take

    There are numerous annuity options to choose from, all of which will be explained in the upcoming articles. One thing that everyone must know is that once an annuity is purchased, it cannot be changed nor can it be cashed out or transferred.