Single Versus Flexible Premium

The way you pay for your annuity will vary depending upon what your goals are and which type of annuity you select to try and meet those goals. Single premium annuities are typically paid for in one lump sum. They can gather interest for as long as you want before you decide to annuitize them. Sometimes, there are exceptions that can be made. Some insurance companies allow you to put in more money for up to a year after the contract date and still consider the annuity to be a single premium. In these instances, if you want to put in more money after the one year date, you would need to start a new and separate policy. There are no limits as to how many annuities you can own. Some people use a portfolio of many annuities to help achieve their financial goals.

A flexible premium annuity will allow you to add more money throughout the life of the contract—at least up until the annuitization date. There are technically no restrictions on how much you may add per year, although some insurance companies might have a minimum deposit amount associated with their specific policies. It is important that you are aware of any premium restrictions that your company has in place. The most common way to invest with a flexible premium is to earmark a percentage of your paycheck to go directly into the annuity. This makes flexible premium annuities a good and automatic way to save money for your retirement years, much like an IRA or 401(k).