Different Types of Annuities:
Annuities used to be quite straight forward and easy to understand. One used to put the money in and received a fixed amount after retirement depending upon different factors like interest rates and how much money was put in to the account. Annuities gave guaranteed income over the life of the owner.
This resulted in annuities become quite popular and their demand skyrocketed. Hence, more complex types of annuities were introduced and the payments were increased if more risk was taken.
Different Types of Annuities:
Annuities used to be quite straight forward and easy to understand. One used to put the money in and received a fixed amount after retirement depending upon different factors like interest rates and how much money was put into the account. Annuities gave guaranteed income over the life of the owner.
This resulted in annuities becoming quite popular and their demand skyrocketed. Hence, more complex types of annuities were introduced and the payments were increased if more risk was taken.
The providers of annuities gradually began to adjust the annuities more and more, in order to meet the interests and needs of the investors. Now there are hundreds of options available for annuities. This has resulted in annuities becoming complex and it is now a more complex process when deciding to purchase an annuity.
Structured settlements are the future payment streams which result from a settlement of a wrongful death, personal injury, workers compensation claim, medical malpractice and other tortious conduct. It should be noted that selling of workers compensation payments are illegal.
Annuity issuers (life insurance companies) make these future payments and sometimes guaranteed payments (which is paid regardless of the whether the person is alive or deceased) or life contingent (which ceases on the death of the annuitant). Both life contingent and guaranteed payments are bought by Summerlin Funding.
Single Premium annuities:
Single premium annuities through a single premium are purchased upfront and they act as investment annuities. A court order is not generally required for the transfer of such annuities. A transaction can usually be completed in only a couple of weeks.
In case you are a recipient of a government or a retired worker pension plan, these are normally not transferable and one must hold them to term.
In case you win a large lottery, there will be an option to either take annuitized payments or a lump sum amount. If the annuity option is chosen, and there is a change of mind at a later date, one may sell it to Summerlin Funding.
A number of structured settlements arise as a result of lawsuits, in particular tobacco lawsuits. It is especially common in case of large payouts. A huge number of tobacco lawsuit annuities were set up over last couple of decades.
A number of other examples of annuities exist, particularly relating to vehicular accidents or injury lawsuits.
- Injured people at work may receive the workers compensation payment via annuities.
- Those people who get injured because of defective products which they bought may get compensation via an annuity.
- People who win lawsuits which are based on discrimination, harassments or other violation of their civil and personal rights may be paid via an annuity.
- In case a mistake by some construction company results in someone losing their property and they get victory in court, they might be paid via an annuity.
- Those lawsuits which are based upon environmental harm can also result in payments via annuities.
- Cases related to divorces, corporate disputes and businesses which break up are some other examples.
History of Annuities:
Annuities were some very basic tools for investment in the old days, just like pensions. The recipient was paid an amount which was predetermined over a predetermined time period, and guaranteed income was setup for the owner.
With time, the annuities got specialized more and more in order to meet the wishes and needs of different investors. This has resulted in different terms on certain things like guarantees on income and payment terms, survivor benefits. Structured settlements can also be included in the definition of Annuities.
Structured settlements are a whole category of annuities which arises because of a legal agreement, mostly after a lawsuit. The plaintiff and defendant will come to an agreement on the needs of the winning party in future. After that the defendant puts money in the structured settlement, which is maintained by independent third party like an insurance company. In some of the cases there may be a partial lump sum with partial payments.
Structured settlements may arise as a result of lottery winnings, wrongful death suits, workers compensation, or insurance settlements or personal injury.
Benefits of Annuities:
Annuities have different advantages. These include:
- They give you an opportunity to grow the money tax deferred, you can enjoy all the gains and they help you to make more efficient investments.
- They are mostly viewed as quite stable and safe investments. Mostly they are backed by the insurance companies. The recipient does not have to worry about receiving the payouts.
- Annuities give you an opportunity to earn money for the rest of your life. It is quite important in giving some stability in case a person lives longer than they prepare for when amassing savings from retirement. It’s worth it to have a backup plan just in case you fortunately live longer than an average person.
- The risk is also eliminated and it is a big benefit. Insurance company takes the risk. You do have to worry about any risk factor when projecting how much money you will be receiving. This simplifies the things, and this is exactly why annuities are very popular with people who are nearing retirement.
Disadvantages of Annuities:
- They are complicated options for investment which include a number of extra fees and expenses, along with administrative charges. They also tie up the money for a certain period of time, so the flexibility is taken away and you have to remove some options. In case you think that you have a chance that you will need the money anytime sooner, then you should avoid annuities.
- Tax penalties are also there in case a person decided to pull out his funds from an annuity before they turn 59 and a half. Because of this many people avoid annuities.
- After weighing all the pros and cons, you can decide if the annuities are the right option for you and if you should buy them, hold on or consider selling.