What is Annuity?
It is a fixed amount paid to the beneficiary. The Annuity is paid as a settlement of insurance claim or by way of damages for any torts or by the investor to the beneficiary as a retirement plan. The annuity could be for a particular period of time or for life depending on the type of investment made. If the Annuity is paid as a compensation for accident, then such Annuity will be till the person fully recovers from the injury and is able to take up his normal work. If it is as a retirement plan, then such Annuity will be for life. The amount received as Annuity is not taxable. Therefore the beneficiary need not explain the amount he has received as Annuity and the source from where he got the Annuity.

Types of Annuity:
The amount a person is entitled to as Annuity is dependent upon the type or nature of investment he has made.

Fixed Annuity:
Here the person gets a fixed amount as Annuity. The investor is obliged to pay the fixed amount irrespective of the market fluctuations and the earnings he has made out of the amount invested by the person.

Immediate annuity:
As soon as the investment is made, the amount starts earning and the earning is transferred to the beneficiary. This is a wonderful option for those who want immediate returns from the investment.

Deferred Annuity:
As the very name suggests, the Annuity is deferred to a later date. In other words, the person receives the Annuity at a later date as indicated by him. During this period the Annuity accumulates and the accumulated Annuity will be available for withdrawal with tax benefits.

Equity indexed Annuity:
This Annuity is based on the market fluctuations. But the investor guarantees a particular amount as minimum Annuity. However, depending on the market behavior, the investor may be eligible for higher annuity.

Variable Annuity:
Here the Annuity is dependent on how much the investment has earned in the Stock Market. That means the amount of Annuity a person gets is directly dependent on fluctuations in the Stock market.

Roth IRA:
This is ideal for those who are in higher bracket of tax. Normally, in this category the Annuity is allowed under certain conditions. Usually the duration of this type of investment is five years.