What's an Annuity-what makes it an investment?

Question

What's an Annuity-what makes it an investment?

Answer 1

An annuity, for all intents and purposes, is simply another word for "long-term" investment, and is similar in a few respects - to a 401k, 503b.  The similarities are:

1) you put in $$, it draws interest, and it pays out later, usually during retirement.

2) there is usually a 'minimum' age you must be, in order to start drawing out your $$.

The differences are:

1) you can 'tweak' an annuity - meaning you have more control over how much is paid out - over a particular time, to whom it's paid out, etc. You can structure it yourself (within certain governmental guidelines) - whereas a 401k, the government more determines the structure, payout etc)

2) annuities are less volatile, meaning they are subject to less risk (very important to people who perhaps have started to save for retirement later, and cannot subject themselves / their savings to market fluctuations)

There are also different types of annuities:

1) fixed

2) variable

Each has advantages, and only you / yours can decide which is best for you.

For more information, if you just type "annuity basics" into a search, i'm sure you could find enough links to become quite informed - - but one link that i found interesting when learning about annuities before becoming licensed to sell them a few years ago . . .  www.investopedia.com

Good luck!

Answer 2

An annuity is a set of payments.  What would make it an investment is something like life insurance.  You invest so much money into the life insurance so that the receiver of the benefits from that life insurance gets periodic payments for life.