Annuity Flexibility


Annuity is one of the most flexible saving and investment alternative available today. Starting from the ways to invest into annuity, people can either use their after-tax money to deposit into an annuity or they can fund their annuity by rolling-over some qualified money.

The flexibility of an annuity can be best understood by an example like:- traditional IRA and 401(k) owners can transfer their accounts into a qualified annuity and it maintains their tax-deferred status. Annuities offer fixed interest rates and added death benefits and in some cases it can also offer other features from the insurance company that is not available in a qualified retirement plan.

Non-qualified annuities or after tax annuities are also very popular. Non-qualified annuities generally require less time to establish. In addition, when you withdraw funds, you'll only pay taxes on your accrued interest, since your principal has already been taxed once before.

Annuities can also provide incredible flexibility during the payout phase. When the payout phase begins, you can opt to receive your annuity's value in one lump-sum, or you can elect to receive a steady stream of payments in regular interval like monthly, quarterly, etc.

If the annuitants decide to opt for a regular stream of payments, many insurers allow them to have annuity payments last for a set amount of time. Many contracts also allow you to receive payments for as long as you and your beneficiary live.

Having indefinite payments for rest of the life provides the annuitant a predictable source of income. Some variable annuities will even let you choose between fixed payments, or payments that fluctuate based on the performance of mutual fund investment options. The longer your payment period, the smaller your payments will be.


Annuities can also allow you to withdraw money from your account once periodic payments have begun. Providing more flexibility some annuities are designed to be immediate annuities. Immediate annuities have no accumulation phase. They begin paying you in regular installments the moment you purchase the contract.