An overview of annuity- Types, facts, and service providers
An annuity is an insurance product through which you obtain regular disbursements after paying a series of payments for a specified time. Many use it as a part of their retirement strategy for a guaranteed retirement income. If you have also decided to put some of your savings into an annuity to secure your life post-retirement, you should know the ins and outs of this insurance product for rewarding results.

How does an annuity work?

• You make an investment in the annuity, and then it makes monthly, quarterly, or annually payments back to you.
• The payment amount you receive for the specified number of years depends on a number of factors, including the duration of the payment period, your age, gender, and the current annuity rate.
• It is up to you to choose payments either for a set number of years or for the rest of your life.

What are the different types of annuities?
The following are the five different types of annuities:

• Fixed annuities- As the name suggests, these annuities have fixed rates. Often higher than bank CDs, these annuities pay guaranteed rates of interest and the income can be drawn immediately or you can opt for deferred income. The fixed annuities are chosen mostly by retirees and pre-retirees, who are looking for a guaranteed, no-cost, and modest fixed investment.
• Variable annuities- The variable annuities are a tax-deferred retirement vehicle, which allows you to choose from a selection of investments. The performance of these investments or subaccounts determines the account value. They are popular among pre-retirees and retirees who want a shot at capital appreciation along with a guaranteed lifetime income.
• Fixed-indexed annuities- Essentially fixed annuities with a variable rate of interest, the fixed-indexed annuities are added to your contract value if the basic market index is positive. Ensuring the benefit of a guaranteed minimum income, they offer a chance of principal upside fixed to a market-based index. Fixed-indexed annuities are ideal for retirees and pre-retirees who want to conservatively and without fuss want to participate in potential market appreciation and with downside principal protection.
• Immediate annuities- These are just like life insurance policies having a difference of payment. Instead of making a lump-sum payment upon death, these annuities ensure regular income payments until death. The immediate annuities are for retirees and pre-retirees who require a higher-than-average flow of income and are okay with sacrificing principal in return for higher lifelong income.
• Deferred annuities- The deferred annuities delay payments for a later date (more than one year) for less money. These annuities appeal to those who want a guaranteed income in the future and not right away, or for those individuals who want to create a ladder of income over separate periods subsequentially in life.

What are the mistakes to avoid while buying annuities?

• Not comparing annuity rates- Some people ignore the importance of comparing annuity rates. One must compare annuity rates offered by different providers and should keep an eye on the yearly changes in rates, such as comparing annuity rates of 2017 with the current year and the likes.
• Buying a low-rated carrier- Don’t ever go for a substandard company selling annuities only because it is offering better benefits.
• Not doing the homework right- Rather than signing an annuity contract in a hurry, you should take the time and put in all efforts to make an informed decision.
• Taking extra withdrawals- There are certain annuities that allow you extra withdrawals. However, doing so can slash the guaranteed value or the retirement annuity rates.

What are the annuity facts every retiree should know?

• Annuities can serve as smart tax saving tools, which help avoid big tax bills in retirement.
• Annuity payments are likely to rise with an increase in interest rates. Therefore, your annuity payments would rise in the future if there is a rise in the interest rate.
• Annuity commissions and fees can be high, especially, with indexed and variable annuities.
• Annuity payments can be fixed or might increase over time.
• Annuities bought from established and reliable annuity providers are strong in comparison to those sold by an agent.
• An immediate annuity begins paying income immediately but not right away. It starts paying you income one annuity period after purchase, which can be 30 days to one year.
• Deferred annuities provide lifetime income along with tax-advantaged saving.
• Fixed annuities provide a guaranteed minimum rate of return and a fixed series of payments.
• A variable annuity carries an investment risk, as its rate of return is based on the performance of subaccounts.

Which are the top annuity rates service providers in the country?
Some of the top annuity rates service providers in the country are:

• American Internation Group
• Minnesota Life
• American National Life Insurance
• North American Company for Life and Health
• Midland National
• USAA
• Penn Mutual
• MetLife