What are the basic types of annuities?
An annuity is a contract, usually sold by an insurance company, that makes periodic payments to the holder at a future date, usually beginning at retirement. A fixed annuity pays a guaranteed rate and guarantees principal. A variable annuity produces investment returns based on the performance of the investments made through the annuity. An immediate annuity begins making payments right away, rather than several years from now. All annuities are tax-deferred, meaning that the income resulting from the growth of the assets within the annuity is deferred until withdrawals are made from the annuity. The term “tax deferred annuity” actually refers to certain pre-tax savings programs available to public school employees and the employees of nonprofit organizations defined in section 403(b) of the Internal Revenue Code. Variable annuities typically offer mutual fund accounts that are managed identically to well known retail mutual funds. Such funds are called clones since they are patterned
