Types of Annuities


Every annuity contract will have an assigned interest rate. Generally, the minimum guaranteed interest rate on a fixed annuity is tied to what is happening in the broader economy. Sometimes, the interest rate on a fixed annuity is simply set for the life of the contract. In other cases, it can vary annually. However, there is generally a guaranteed floor for the interest rate. It is helpful to understand the interest rate on your annuity contract if you are considering selling it, as you can evaluate how much the annuity could earn over time if you were to keep it in force.

Here at Annuity Capital, LLC, we’re here to help you find the annuity option that works best for you. When people hear the word “annuities,” there is often an inclination to think only of annuities that are used for retirement planning, but there are actually several different ways annuities can be used. Some examples include:

Retirement Planning
This type of annuity is purchased from an insurance agent or insurance company, and is designed to help annuity owners supplement their other retirement income with an income stream. These annuities can be deferred annuities or immediate annuities. They can also be fixed annuities, or they can be variable annuities, where the interest rate is not guaranteed, but is instead tied to the securities market.

Lottery Annuity Payments
When someone wins a state or national lottery award, the winner often has a choice of taking their winnings as one lump sum payment or taking it as an lottery annuity over time.

Structured Settlements
People who have been awarded damages in a lawsuit often receive their payments in the form of a structured settlement, which is a type of annuity where the damages are paid out over a period of years.

Determine the Present Value of Annuity Before Selling
If you are considering selling your annuity, then the amount you are offered will be based, in part, on the present value of the contract. The present value of your annuity is the value of your future payments, after applying a “discount” rate (a specified rate of return). If the future value of your annuity payments equal $100,000, then you can expect to receive a lesser figure as a lump sum now as a result of the time value of money.

Contact us for more information on the different types of annuities available to you. We serve clients nationwide.