Determining which annuity rates are right for your retirement needs and goals will take a little research on your part when it comes to the different types of annuities that are available and the pros and cons that come with them. Before you compare different annuity rates you’ll need to take time to become familiar with the basic types of annuities and which ones are available for purchase. Generally, annuities come in two categories: variable and fixed. When you compare rates you’ll ensure that you’re selecting the type of annuity that offers the best match for your specific needs. If you’re unfamiliar with annuities or investments in general, then it’s recommended that you meet with a financial planner in order to ensure that you purchase the annuity that offers the best rates for you and your family.
Annuity Rates: Choosing the Right Kind of Annuity
A fixed annuity is similar to a CD. Like a CD they will pay a guaranteed rate of interest. A fixed annuity can be immediate or deferred. Deferred annuities accumulate regular rates of interest and immediate annuities will make fixed payments, which are determined by the size and age of your annuity. This type of annuity is offered by an insurance company and the rates are quoted as effective annual yield. You’ll be given the option to select the guaranteed income period, usually between two and eight years. In many cases you’ll
be offered a higher rate for holding the contract in place for a longer period of time.
Deferred income annuities will combine features of both the deferred fixed annuity and the immediate annuity. If you want guaranteed income at a later date then you should consider a deferred income annuity. This type of annuity will combine the selected income period of the immediate annuity with the investment growth period of the deferred annuity. The options for the investment growth period will vary between two and thirty years, depending on the company you receive the quotes from.
The Benefits of SMAs and Fixed Index Annuities
The owner of immediate annuities can choose to sell the annuity for an immediate payout. When a pre-owned annuity is for sale it’s referred to as an SMA, or secondary market annuity. The rates for the SMA are typically based on the interest rates that were in effect when the annuity was originally purchased.
The fixed index annuity will share some of the same features as the deferred annuity. However, the annual growth of the index annuity is tied to a benchmark stock index, compared to a fixed rate of return. The growth rate for the fixed index annuity is subject to caps and rate floors, which means that they will not fall below or exceed specified returns, even If the underlying index fluctuates outside of the set parameter.