Annuity Money

Written by Jacey Harmon
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Annuities are accounts that are used to convert a sum of money into a series of payments. The annuity can be funded over time through periodic installment payments or with a single lump sum. Once converted into a payment stream, the payments can be allocated on a monthly, semi-annual or annual basis. The payments can last for a period of months or up to the lifetime of the annuitant.

Funding and Using Annuities

Funding an annuity over time is usually done by individuals who are saving for a specific goal. The most common and proper use of annuities by individuals is for retirement planning. The individual accumulates a nest egg through periodic payments and converts the funds into a payment stream when the funds are needed.

Single premium annuities can be used by individuals who have a lump sum that they would like to convert into periodic payments. Single premium annuities are also used by insurance companies to settle claims and lawsuits. The annuity funds the settlement over time by providing payments over a specified period. The insurance company owns the funding annuity and the claimant has rights to the payments.

Once an annuity is converted into a payment stream, you can no longer access the funds in the account. The only way to be able to access the pool of money is through selling future payments. The annuitant will receive a percentage of a future payment or payments in exchange for assigning future payments to the buying entity. This will provide a flexible option for what are otherwise inflexible accounts.

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