What Are the Different Types of Annuities?


Quick Answer

The two basic types of annuities are immediate, where an individual receives payments instantly, and deferred, where payments are set for a future date, explains Annuity FYI. Within both categories there are fixed and variable annuities.

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Full Answer

A deferred annuity accumulates money over time, and an individual can make a one-time deposit or make regular or intermittent investments, states Annuity FYI. Money is tax-deferred until it is withdrawn. Some deferred annuity plans allow an individual to withdraw a small percentage of the investment each year. An individual collects fixed payments from an immediate annuity as soon he purchases it for either a specific amount of time, such as 10 years or for the rest of the account beneficiary's life.

Both immediate and deferred annuities exist as a fixed or variable entity, according to Annuity FYI. There are two types of fixed annuity: guaranteed return and market value adjustment. Both have guaranteed rates of return, but a guaranteed return annuity ensures an individual receives 100 percent of his investment, and the principal is guaranteed. An MVA annuity does not have guaranteed principal. Fixed annuities are typically government securities and corporate bonds.

Issued by insurance companies, a variable annuity does not have a guaranteed rate like fixed annuities, and it involves an individual paying principal to the insurance company in return for variable payments over the life of the annuity, explains Annuity FYI. There are several different types of variable annuities, including tax-deferred invest unlimited funds, living benefits and death benefits.

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