I will wager that I got your attention with Baskin Robbins in the title of this article. The only reason I put that there was to highlight the fact that there are many types of annuities, maybe not 31 different flavors, but plenty of different varieties to meet your needs.

I thought this month I would share a few facts about some of the various options available.  The three primary types of annuities are Variable, Fixed and Immediate.

All annuities allow for tax deferred growth and lifetime income options.  Annuities are the only financial option that can provide you with a Guaranteed Lifetime Income.

In addition all annuities can be funded with retirement money, 401K, IRA, 403b etc or just regular savings.

Variable Annuities are actually investments that allow you to participate directly in the stock market, and as such your account values can fluctuate based upon your investment choices, both up and down.

The annual fee's on these plans can be quite high as you frequently have multiple options, each with their own fee schedule.  A fee for owning the contract, a fee for the investment options chosen as well as fees for any riders you desire.

Based upon the high fees charged as well as the potential for loss of principal, many years ago I made a decision to not offer these investments, and I am glad I have done so.

Immediate Annuities as the name implies are designed to be used immediately, well at least within the first 12 months. With an immediate annuity you deposit funds with an insurance company and they will guarantee you a lifetime income.  In exchange for giving your funds to the insurance company the company will provide you with an income stream that is guaranteed for your life, with other options available also.

Immediate annuities are frequently used for Medicaid planning for married couples, as it removes assets from the estate and any income in the name of the healthy spouse becomes a protected or exempt asset.

Fixed Annuities offer a variety of choices, the three that I most frequently work with are.

CD style annuities are generally for a 5 year period and even now are paying in the range of 2.5 ~ 3% per year, with no taxation until the funds are withdrawn. Like a CD there are penalties for early withdrawals, and on annuities these fees are  generally higher.

Indexed annuities will pay you an interest rate that is linked to an external stock market index like the S&P 500. The rate of return is limited as you are not directly participating in the stock market like in a variable annuity.  It does however allow you to get a stock market based return without any downside risk.

Income annuities allow you to create your own personal pension plan.  You can use retirement funds or regular savings and then when you wish to start a lifetime income stream either on your own life, or with a spousal benefit you can do so.

These are especially favorable with married couples as they can position a portion of their retirement accounts to be activated upon the demise of either spouse to help replace the lost income from either pensions or Social Security.

Well, this was just a short (by my standards) and quick primer on annuities.  If you have any old ones you are unsure about and would like to have reviewed or are interested in learning more please give me a call or send me an email.