Basically there are two commonly used types of annuities. The first is a deferred annuity and the second is an immediate annuity, both have advantages and disadvantages conveniently met in full by the other. In other words what one type lacks in the advantages column the other processes.
A deferred annuity you purchase the annuity for a sum of money and either continue to make payments in or leave it as is. As time progresses the annuity gains interest and grows in amount. At a predetermined time you decide to have the annuity pay you back and you receive money back then, at the deferred time.
An immediate annuity is one where immediately upon purchase of the annuity you begin to receive compensation. The primary disadvantage here is that unless the annuity is extremely large and the payments relatively small, so you can benefit from money in time and interest, your immediate payments won’t be very large. However, this can be advantageous if you are leaving money to a loved one and want to prevent them from having access to the full amount until they mature also preventing a settlement advance.
Deferred annuities, the ones you have to wait for, can be converted into an immediate annuity depending on how the annuity is originally set up.
There are tax advantages to annuities because the money that grows in either type can be tax-deferred. What this essentially means is that when you begin to take payments out on the schedule you chose, either monthly, quarterly y, annually or in the lump sum the amount you originally contributed cannot be taxed, however the interest earned will be. The interest earned taxation is on whatever tax schedule your personal income tax determines.
As you decide which annuity is best for you consider your current financial situation and your most conservative future financial situation. Are there medical bills that will accrue monthly and if so how much? Or are those amounts likely to increase or decrease over time? If you have other streams of income and do not plan to be dependant of the annuity perhaps quarterly payments will be the best payout option. When deciding between immediate or deferred annuities first determine when you will be needing the payment. If you are closer to retirement age and have some money to invest, perhaps from the sale of a home, you may need to choose immediate payments. In the end the purchase structured settlements online may or may not be in your best interest. Make sure you consult a trusted financial planner before making any long term financial plans.
