An annuity is an investment vehicle offered by an insurance company to individual investors looking to accumulate cash and/or create an income stream for retirement. There are two primary income benefits options available to annuity owners, immediate and deferred.

Immediate Annuities

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As people approach retirement, their focus often shifts from the accumulation of assets, to the liquidation of assets for the purpose of creating an income stream. While many retirees of past generations were able to rely financially upon pensions offered by their employees, retirees of today are often forced to rely upon their own individual investments for their retirement income needs. One of the investment vehicles many individuals turn to upon retirement is the immediate annuity.

US citizens may start receiving payments at a minimum of 59.5 years of age - therefore immediate annuities are only an option for people of this age demographic. If withdrawals from an annuity are taken before that age, you will receive a tax penalty from the IRS, and possibly from the insurance company as well.

The income payments made to the annuitant will consist of principal and interest. How these payments are segmented depends on the type of annuity chosen and the interest received - fixed, variable, or indexed annuity.

Deferred Annuities
A deferred annuity focuses on asset accumulation and tax deferral on the account interest. This type of annuity has an accumulation period, which differs from the immediate annuity option. This type of annuity can be funded with any premium plan depending on the type of annuity (fixed, variable, or indexed) and the insurance company. Contributions into a deferred annuity can be utilized to accumulate funds for retirement, as they will grow on a tax deferred basis.

Both annuities serve different investment purposes, giving individual investors options for how they will accumulate funds for retirement and how they will receive those funds during retirement.

For more information on annuities, go to http://www.bestfixedannuityquote.com

John C. Ryan works with http://www.BestFixedAnnuityQuote.com offering the latest information and resources on fixed, variable, and indexed annuity insurance along with annuity quotes from experienced professionals.