Have You Heard of Deferred, Fixed and Variable Annuities?

Posted on March 19, 2013

Deferred annuities came into play in the 1970’s.  This is a way for accumulating savings with a view to eventually distributing them either as an immediate annuity or a lump sum payment.

There are two types of deferred annuities.  A fixed deferred annuity grows by interest rate earnings alone.  A variable annuity permits allocations to stock or bond funds and for which the account value is not guaranteed to stay above the initial amount invested.

Fixed indexed annuities came about in 1995 and have features of both fixed and variable deferred annuities.  The insurance company typically guarantees a minimum return but an investor can still lose money if they cancel the policy early, before a break even period.

Deferred annuities are divided into fixed or variable.

Fixed annuities offer some sort of guaranteed rate of return over the life of the contract.  There are usually some provisions in the contract to allow a percent of the interest and/or principle to be withdrawn early and without penalty.

Variable annuities allow money to be invested in insurance company separate accounts.  The primary use is to allow an investor to engage in tax deferred investing for retirement in amounts greater than permitted by individual retirement or 401K plans. (*Information on Variable annuities is for education/informational purposes only.  Bulbrook/Drislane does not sell variable annuities.)

Many of these contracts offer a guaranteed minimum rate of return, even if the underlying separate account investments perform poorly.

John M. Bulbrook is founder and CEO of Bulbrook/Drislane Brokerage, a national distributor of financial products headquartered in the Boston area.  For more than 30 years John has helped insurance agents, financial planners and brokers find the right insurance and annuity products to meet the client’s needs.  In the process, he has earned a reputation throughout the industry for his integrity, resourcefulness and hard work, all carried out in good humor.

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