Types of Retirement Plans Offered in Massachusetts
We will help determine which type of life and annuity plan in Massachusetts and Boston is suitable for your retirement. Invest in your future with the help of our staff. Below you’ll find information on how you are covered and your available options.
The Types of Annuities
An immediate annuity is a contract in which payouts begin immediately, or within the first year, after money is deposited into the annuity. This type of annuity is designed to provide someone with an immediate and steady flow of cash income.
A common type of immediate annuity is the:
Single Premium Immediate Annuity (SPIA)
This type of annuity is usually purchased for income. Usually, the owner of the contract will designate the amount of income he or she wishes to get per year, based on how much is needed and how long the money is needed for. This type of annuity can remove the worry of managing money. SPIA payments are not affected by market swings and the recipient can count on the income from this type of annuity each month, which can assist in budget planning.
A deferred annuity is designed for saving money to accumulate for future use. Deferred annuities are growth products where the tax on the interest earned is deferred until the money is withdrawn from the annuity.
A few types of deferred annuities are:
A fixed annuity gives a fixed interest rate for a fixed amount of time, as stated in the contract. The fixed rate varies and depends on the insurer’s current investment portfolio. The major advantage of a fixed annuity is safety, for a predetermined rate is set and one cannot earn more or less than the fixed rate . Note: a fixed annuity can be either deferred or immediate. Also, a fixed annuity can be either a single premium or flexible premium annuity.
This type of annuity has no safety of principal, because the insurance company invests the money, as the policyholder selects, into separate funds that have market risk, i.e. stocks, bonds, etc. There are also administrative and sales charges associated with this type of annuity. This type of annuity can be compared to a mutual fund. There is a significant amount of risk in this type of annuity. Note: a variable annuity can be either a single premium or flexible premium annuity.
Equity Indexed Annuities
This type of annuity gives the owner the ability to participate in the growth of the stock market, i.e. S&P 500, NASDAQ 100, Dow Jones Industrial Average, without having to risk any of their principal. Equity indexed annuities provide guaranteed minimum interest rates similar to fixed annuities or CD’s. Therefore, if the index someone is participating in goes up, then his or her account value goes up (subject to limits). If the index someone is participating goes down, then his or her money is safe and is guaranteed to earn no less than the contract’s guaranteed minimum interest rate. Moreover, this type of annuity allows the contract holder to keep their principal 100% safe and, at the same time, participate in growth opportunities potentially higher than what they would be able to get in a regular fixed annuity. An equity-indexed annuity seems to take some of the good points from a variable and fixed annuity and combine them, without combining the downsides. Note: an equity-indexed annuity can be either a single premium or flexible premium annuity.