An annuity is a long-term contract between an employee or an individual and an insurance company that assures a steady and regular income after retirement. It is a way to save money and make the future stable. An annuity contract or insurance can be purchased directly or through an employer.
Types of annuities:
There are various types of annuities;
- Immediate annuity: An employee pays a lump sum or a series of smaller amounts in exchange for payment made by the insurance company. In an immediate annuity, payment is made instantly or in a lesser period of time.
- Deferred annuities: In a deferred annuity contract, payment is made on a defined future date. There are different types of disbursement timelines for deferred annuities. Employees can choose a plan that makes payments 15 or 25 years from the date and continues for the rest of their life.
- Qualified employee annuities: Employees may seek annuities under their employer, in which the employer may have a qualified employee annuity program.