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The term annuity applies to any type of fixed payment over a specified period of time. It can relate to various financial aspects including retirement funds, inheritance, lottery winnings, and even insurance funds. The payment period for an annuity can be monthly, quarterly, or annually depending on the type of annuity it is. Many individuals find annuities offer them a very safe way to ensure they have the money they need when they need it.

There is plenty of tax advantages associated with annuities as well. The funds an individual is responsible to pay taxes on are based on the amount of money they receive in that calendar year rather than paying for the taxes on the entire amount of money at one time. This lowers the tax bracket the individual is under so the amount of taxes that will be paid out over all in installments is much less than if the money was allocated at one time and the taxes were due on the entire amount.

There are several other advantages to annuities in addition to the tax savings they offer. It is a very comforting feeling to know that you will have a set income to depend on in the future. Since you will have an idea of the amount of money that will be coming in, it will be much easier to prepare for your future expenses.

Annuities also offer a very safe way to watch your invested funds earn a return. There is no risk with annuities like there is with mutual funds and other types of investments. In the shaky economy we live in today, this is good news. There are several different types of annuities.

An immediate annuity can be established with any dollar amount. The interest rate can be a fixes or variable rate. You get to decide the allocation of the funds in relation to the time intervals. The amount will depend on the accumulative total of funds when you start withdrawing them. Fixed annuities come with a fixed rate of interest and you have to invest a minimum amount to be guaranteed the highest interest rate. With a variable annuity you have the option of investing your funds anyway you desire. Many people like the idea that they have complete control over their investments.

Deciding which type of annuity is right for your situation may be difficult to determine on your own. It is a good idea to consult with a financial advisor to ensure you get the best option for your lifestyle.