Annuity Stream

Annuities are insurance products in which the annuity owner makes a payment or a number of payments to the company offering the annuities, in exchange for a guaranteed income stream for the rest of his life or a pre-agreement expiration date of the annuity.

On the basis of their statements (the income stream from an annuity), annuities are classified as fixed rate annuities or variable rate.

In fixed rate annuities, the annuitant is guaranteed a fixed rate of income from the annuity, regardless of the performance of investments in which the premium pension is invested. On the other hand, the variable annuity statements vary depending on investment returns where the premium pension is invested. Both fixed and variable annuities have their advantages and drawbacks.

The main advantage of fixed rate annuities lies in their safety and low risk. That is to say that regardless of the performance of their underlying investments, the annuity owner is always assured of a steady stream of income, often for a lifetime. Thus, the fixed rate annuities can be ideal for retirees and others from risk aversion that does not want to undergo the rigors of the investment. With fixed annuities, you get a reasonable return on investment of pension without exposure to investment risk.

Conversely, lower fixed-rate annuities is that they offer limited space for growth, and regardless of how investments using your premium pension is running, you still get a fixed return him. In addition, by opting for a pension at a fixed rate you could not take advantage of certain tax deferral benefits available to holders of variable annuities.

With regard to variable annuities, their main advantage is that they offer room for growth, which could result in a significantly higher return in the long term. In addition, the statements of variable annuities are often subject to tax deferral benefits. The disadvantage of variable annuities is that annuities at variable rates expose the annuity holder's investment risk, and whether the investments made with premium annuity bad results, the pension holder could end by seeing a flow significantly decreased the income of the annuity.

Such a decrease in revenue streams is probably the last thing you want to hear in the middle of your retirement, especially if the annuity is your only source of stable income at that point.