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Topic Annuity Types

Annuity Types

What are the different types of annuities?

What makes an annuity an annuity is its ability to provide guaranteed, lifelong income in retirement. Some annuities exist to do only that, while others have that as just an option. The former (provides income and income only) is called an income annuity. There are three types of income annuities:

  1. Immediate annuity (provides guaranteed, lifelong income starting 1-12 months after purchase)
  2. Longevity annuity (provides guaranteed, lifelong income starting 2-40 years after purchase)
  3. Qualified Longevity Annuity Contract or QLAC (a longevity annuity purchased with IRA funds starting after age 70½

The other type (has the option but not requirement) to provide income is known as a deferred annuity. There are three types of deferred annuities:

  1. Fixed annuity or multi-year guaranteed annuity (like a CD, it provides a guaranteed rate of return for a fixed number of years)
  2. Fixed indexed annuity (investment product that tracks market indices with limits on how much you can gain/lose)
  3. Variable annuity (investment product using mutual funds with limits on how much you can gain/lose)

Blueprint Income offers all types of income annuities, as well as fixed annuities. The Personal Pension is our flagship product that gives you access to all four with subscription-like funding.

Annuity Types

What is an immediate annuity?

An immediate annuity, a.k.a. single premium immediate annuity or SPIA for short, is the simplest annuity product on the market. It’s purchased by people retiring within the next year or already in retirement. For a given amount of money paid upfront today, you receive a set amount of monthly income starting within one year that lasts as long as you live.

Annuity Types

What is a longevity annuity?

A longevity annuity, a.k.a. deferred income annuity or DIA for short, provides lifetime income starting 2-40 years from now. Money is paid upfront, but the income payments you receive are delayed for a period of 2-40 years. Because of the deferral, you will receive higher monthly income as compared to an immediate annuity. You’re also able to add additional payments to the contract over time (known as the Personal Pension). Longevity annuities can be good for people who want income starting years in the future.

Annuity Types

What is a Qualified Longevity Annuity Contract (QLAC)?

A Qualified Longevity Annuity Contract, or QLAC for short, is a special type of longevity annuity. The QLAC is a way to purchase a longevity annuity using your qualified retirement savings (such as from an IRA or 401(k) rollover) but delays the start of that income to after age 70½. It’s given this special designation because it overrides the IRS required minimum distribution (RMD) rules.

Annuity Types

What is a fixed annuity?

A fixed annuity, also known as a multi-year guaranteed annuity (MYGA), provides a guaranteed rate of return for a predetermined period of time. It is most similar to a Certificate of Deposit (CD) that is offered by a bank or other-FDIC insured institution, except that it is offered by an insurance company. When compared to CDs, fixed annuities offer higher guaranteed crediting rates over longer time horizons (3-10 years), tax-deferred growth, the ability to annuitize upon maturity, and liquidity via penalty-free partial withdrawals for those 59½ or over.