What is a Flexible Premium Annuity?
A Flexible Premium Annuity is a type of annuity contract that enables the policyholder to make multiple contributions over time, rather than a single lump sum payment. This flexibility allows the individual to decide the timing and amount of each payment, making it a suitable choice for those who want to build their retirement savings gradually. Contributions can vary based on the policyholder’s financial situation, making it an adaptable tool for long-term financial planning.
These annuities can be fixed or variable. A fixed Flexible Premium Annuity provides a guaranteed interest rate on the contributions, while a variable annuity invests in a selection of funds, offering the potential for higher returns based on market performance. The value of the annuity grows tax-deferred, meaning taxes on earnings are postponed until withdrawals begin, typically during retirement.
The ability to make flexible contributions is particularly beneficial for those with irregular income or who want to increase their investment as their financial circumstances improve. At retirement, the accumulated value of the annuity can be converted into a steady stream of income, providing financial security in retirement years.
