Immediate Annuities begin to pay an income stream immediately (within 30 days or so), after the initial premium is deposited into the annuity. They can provide income for a fixed period, a specific dollar amount, or for the rest of your life, with or without the guaranteed return of your principal, depending on the particular product.

Deferred Annuities are the opposite of immediate annuities in that there is a delay in when the income stream is turned on. They can be fixed, variable, or indexed annuities, and they are a tax-deferred method of saving until you are ready to start taking income from the annuity. If you never decide to take income, the proceeds in the annuity can go to the beneficiary that you name on the policy.

Fixed Annuities pay a minimum, guaranteed rate of interest, typically over a predetermined period of time. The insurance company guarantees that you will earn a minimum rate of interest during the time that your account is accumulating, or in deferral. There are two parts to a fixed deferred guaranteed income annuity, a current interest rate and a minimum guaranteed interest rate. The minimum guaranteed interest rate is the lowest rate that your annuity will earn. This rate is stated in the contract. The current rate is linked to the reserves and interest the company earns on their portfolio, or for an external reference or index. During the payout period the insurance company also guarantees that the periodic payments will be a guaranteed amount per dollar in your account. These periodic payments may last for a definite period, such as 20 years, or an indefinite period, such as your lifetime or the lifetime of you and your spouse.

Variable Annuities involve more risk, because your premiums are invested into a variety of different investment options, such as mutual funds. The rate of return on your purchase payments, and the amount of the periodic payments you will eventually receive, vary depending on the performance of the investment options you have selected. Variable annuities are market – sensitive investment products, a portfolio of mutual funds wrapped in an insurance contract with riders which can have costly fees. These riders generally are charged every year regardless of whether or not the mutual fund has a positive or negative return. For these reasons, JFG does not recommend variable annuities or offer them to our clients, as we prefer instead the safety and growth potential of indexed annuities.

Fixed Indexed Annuities (also know as Equity Indexed Annuities or just Indexed Annuities) give the annuity owner the best of both worlds because they offer the safety of principal and interest rate guarantees of fixed annuities, but they also offer the excellent growth potential of being tied to major stock market index, the S & P 500, for example. Although they are insurance based products and not securities, they can offer some advantages over mutual funds and other investments because the owner of the policy can receive a percentage of the growth of the market index if the index climbs, however, if the market drops, they don’t get a percentage of the loss. Instead they can receive the guaranteed interest rate offered in the policy, and market gains get locked-in and cannot be lost!

Annuities with Long Term Care Benefits – Some annuities have optional or built-in long term care benefits that serve a dual purpose for the annuitant: a savings vehicle and long term care insurance. These hybrid products can pay up to three times the value of the annuity in long term care benefits, or at least 6 years of care, if it is ever needed, and the annuity value can pass on to a beneficiary, as a death benefit, avoiding probate, if long term care is never needed.