Annuities are a unique type of investment offered by life insurance companies. There are a variety of types of annuity, but all work essentially the same way. Initially, you make payments into the annuity over a period of time, then, after a specified period, you receive payouts from the annuity.
Annuities are a popular option for many older investors who have relatively low risk tolerance and require a secure, stable income source in the near future.
However, annuities are not right for every investor, and different types of annuities have different risk factors and potential for payout.
Types of Annuities
There are a variety of different types of annuities, which can be suitable for different investment schemes. Options include:
- Immediate or deferred annuities. Immediate annuities are annuities that begin payout immediately after you've made your first payment. Deferred annuities do not begin payouts until a later date—usually retirement. Deferred annuities continue to accrue interest and are tax-exempt until you begin payout.
- Fixed or variable rates. Fixed rate annuities offer a guaranteed payment, which is a stable, reliable option for clients who require a dependable rate of return. Variable rate annuities adjust the payouts in line with market growth. This introduces more risk, meaning that the investor takes on greater risk, but also has the potential for greater reward.
- Single pay or multi-payment. Annuities can either be paid for in a single lump sum, or through a series of regular payments.
These options allow for a very wide range of annuities that can meet the needs of many diverse investors. By the same token, if your broker recommends a type of annuity that is inappropriate for your needs, it may be a sign that the broker is not making recommendations based on your unique investment needs.
Many brokers have recommended annuities to clients because annuities often offer unusually high agent commissions, and not because they meet that particular client's investment needs. Because of this, many of those clients have suffered from decreased earnings or even losses to their investment accounts as a result.
Get Help With Your Case Today
If you believe that you or a family member suffered financial losses as a result of annuity fraud, you owe it to yourself and your family to seek the counsel of an experienced securities attorney as soon as possible. If your broker's recommendations were based on something other than your best interests, you may be able to recover compensation for the damages you've incurred. However, the time you have to file suit is limited, so it is important to act immediately.