Annuities for Retirement

An annuity is an insurance contract to which you pay a lump sum or multiple premiums in exchange for regular, immediate or future payments. Most annuities offer a guaranteed interest rate in the beginning years, followed by rates that are determined by general market interest rates.

Deferred or Immediate

There are two ways to receive annuity payments: immediately or deferred. The latter is a date specified in the insurance contract. With either annuity, you choose how long you want to receive fixed payments. They usually last from 10 years on up or as long as you live.
Some retirees buy fixed annuities in return for certainty—knowing that they can count on fixed income payments over time, regardless of what may happen with other investments, which can fluctuate in value. Other annuity owners who choose a lifetime benefit option want to ensure some regular income in addition to Social Security benefits, should they live long lives.

Tax-deferred earnings

Another benefit with either type of annuity is its tax deferral on earnings. You pay income taxes on your withdrawals, not as your fixed annuity balance grows. This tax deferral benefit can make a fixed annuity compare favorably to a similar investment that is immediately taxable. Talk to a financial professional to learn if an annuity might fit your financial situation.
An annuity may impose charges, including surrender charges, mortality and expense risk charges, administrative fees, underlying fund expenses, and feature charges that can reduce the value of your account and the return on your investment. You will have to pay federal income tax on earnings you withdraw from the annuity. Payments and guarantees are subject to the issuing insurance company’s claims-paying ability. Underlying investment options are subject to market risk and may lose value.