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Annuity Types

Before you purchase an annuity, it’s important to know how annuity types differ from each other, how the benefits work, and how an annuity might benefit you.

Immediate and deferred annuity

The two main types of annuities are deferred and immediate. With an immediate annuity, you begin to receive income soon after making your initial premium payment. With a deferred annuity, your money accumulates before you begin to receive income. Within these two types, you can opt to purchase fixed, index or variable annuities.

VIDEO: Immediate Annuities

Fixed annuity

A fixed annuity grows at a fixed, guaranteed* rate of interest. After the initial guaranteed* accumulation period, the fixed rate may change, based on a number of factors including the insurance company's recent market experience. The base contract of annuities typically has a guaranteed* interest rate for a specific period of time, and a death benefit feature. A fixed annuity can be purchased for the retirement income stream, helping assure that you will have a monthly income for the rest of your life.**

VIDEO: Fixed Annuities

Fixed Index annuity

A fixed index annuity (FIA) provides the guarantees* of fixed annuities combined with the opportunity to earn interest based on potential market index gains — without ever directly participating in the market and its risk. Some of the features that are available to you through FIAs are bonuses, various crediting methods and allocation options that give you choices for your money.

Some FIAs allow you to turn income payments off and on, depending on your need. While each annuity contract has its own benefits and limitations, some features could help you reduce taxes while allowing your principal to grow while the annuity payments are turned off. Then when you start taking payments again, your income could be bigger because of that additional interest growth. Please note that annuities purchased with after-tax dollars grow tax-deferred; when you withdraw interest and growth dollars, taxes will be due.

VIDEO: Fixed Index Annuities

Variable annuity

A variable annuity (VA), like other annuities, is a contract between you and an insurance company. Unlike other annuities, however, the VA includes an investment feature. The return on variable annuities relies on the performance of the investment portfolio selected by the annuity holder from those offered by the VA. The annuity premium and earnings can be invested in equity mutual funds, money-market funds or bond funds.

VAs can also include minimum guarantees* for returns, income and withdrawals, or benefit enhancements with the purchase of riders.** A VA may be suitable for you if you have a tolerance for risk, money over and above your expenses, and desire portfolio growth.

VAs may be subject to losses, including loss of principal. Because of these factors, a VA may not be suitable for you if you are looking for more conservative financial options.

VIDEO: Variable Annuities

“My biggest passion is for learning,” says President Josh Mellberg. “Once I learn something, I can’t wait to share it with my clients and my team.” Mellberg helps clients understand their retirement options and risk tolerance and then provides guidance on which insurance, annuity and investment options may make the most sense.




Josh Mellberg

President, J.D. Mellberg Financial