Annuities

Annuities are insurance contracts that may be used to help create future income, protect accumulated funds, or support long-term financial goals depending on the specific product.

What an Annuity Is

An annuity is a contract between you and an insurance company. In exchange for a single payment or a series of payments, the insurance company agrees to make periodic payments to you, either immediately or at some point in the future. Annuities are primarily used to provide a steady stream of income during retirement, helping to mitigate the risk of outliving your savings.

Common Types of Annuities

Annuities come in several forms to suit different financial strategies. Fixed annuities offer a guaranteed rate of interest for a specified period. Variable annuities allow you to invest in sub-accounts, meaning your returns depend on market performance. Indexed annuities credit interest based on the performance of a specific market index, offering a balance of growth potential and downside protection.

Income and Accumulation Options

Annuities generally have two phases: the accumulation phase, during which you fund the annuity and your money grows tax-deferred, and the payout (or annuitization) phase, during which the insurance company begins making regular payments to you. You can choose payout options that last for a specific number of years or for the rest of your life.

Important Considerations

Annuities can differ significantly in how interest is credited, when income begins, access to funds, surrender periods, withdrawal provisions, and guarantees. Many annuities have surrender charges if you withdraw funds early, so it is crucial to evaluate your liquidity needs before purchasing.

Disclosure: Annuity products, features, guarantees, surrender charges, and availability vary by contract and carrier. Guarantees are subject to the claims-paying ability of the issuing insurance company. This information is for educational purposes and is not individualized legal, tax, or investment advice.