When the annuitant is ready to start withdrawing funds from the plan, he or she will likely be in retirement and the money withdrawn may be taxed at a lower rate than when the individual was working full-time.
Money can be taken out of the annuity through a system of regular electronic withdrawals or the annuitant can access the funds as needed by writing a check on the annuity account.
If the annuitant needs to withdraw funds from the plan before he or she reaches retirement age, he or she can withdraw up to 10 percent of the amount held in the plan per year.
Instead, the annuitant makes a single or multiple payments into the plan and the insurance company guarantees to provide payments based on the amount deposited into it.
An annuitant may get a higher rate of interest in some years, but the company guarantees that the value will never be lower than the minimum provided by the plan.
This type of annuity can be set up so that the annuitant receives an income for life while being able to control the principal amount invested in the plan.
With this type of investment plan, the annuitant is not taxed on any of the interest earned on the money until he or she starts to receive payments.
Depending on the specific plan, the insurance company may make payments for a set amount of time or guarantee a lifetime income to the annuitant.
The person buying the annuity (the annuitant) can make either a lump-sum deposit or contribute specific amounts to the plan over time.
During these times, an annuitant will still earn approximately 2 percent on his or her investment, although this amount can vary.