1. 130 POINTS
    Daniel J. Wendol
    CEO, Dolphin Financial Group, Florida
    There are many different kinds of annuities offered by many different insurance companies.   Each annuity has its own features.  I typically group annuities into four main categories.

    Immediate Annuities:  This is an annuity that begins a payment stream upon purchase or shortly thereafter (within a year).  The payment is guaranteed for a period of time or for a lifetime (or lifetimes in the case of a joint payout).

    Variable Annuities:   This annuity has tax deferred growth that is based on the performance of the sub-accounts within the contract.  The owner of the annuity can choose which accounts to allocate their funds.  The performance of the annuity can be either positive or negative so an owner is assuming some level of investment risk.

    Fixed Annuity:  This annuity has tax deferred growth that is set for a fixed period of time.  The interest rate of the annuity is usually set at the purchase date but can be adjusted at a later date in some contracts.  The performance is usually a known outcome and highly dependent on the length of the annuity contract.

    Indexed Annuities:  This annuity has tax deferred growth that is based on the performance of an particular index(es).  The owner can choose which index(es) to allocate their funds such as the S&P, but their funds aren't actually invested in that index.  The index is only used to determine the performance.  The performance of indexed annuities are usually only zero or higher with a limit on the upside known as a "cap."    

    These are general definitions and are by no means suggesting which is better or more appropriate for any situation.  My recommendation, if you are interested in learning more about annuities, is to speak with a professional licensed to describe the pros and cons of each annuity type based on your particular situation.
    Answered on May 15, 2013
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