Annuity payment is a kind of investment option that can be realized after retirement as a monetary compensation which is paid out over a specified period of time. Better known as 'structured' payments, annuities generally differ from insurance settlements or jackpot lottery winnings. People who invest in this kind of option are known as the 'Annuitant'.
In case, an annuity payment is given through an insurance company, it is then referred to as structured settlements. This type of transaction occurs when the Annuitant is compensated for injury or illness which was caused by the negligence of another. Structured settlement annuity payments are tax-free.
Types of annuity
There are basically two types of annuities; fixed annuities and variable annuities.
A fixed annuity gives a guaranteed rate of interest over a specific period of time. As and when this period expires, a new interest rate is set for the next period of time.
Variable annuities provide much wider range of investment funding options. It is more depended on the investment options of the principal, returns are not guaranteed.
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