What is an Annuity?

Annuities are designed to provide a steady cash flow during retirement years to alleviate the fear of outliving one’s assets.

You can fund your annuity with a lump sum payment or via premium payments.
Premium payments can be flexible or scheduled.
An annuity can pay out immediately or deferred. A deferred annuity allows for an accumulation period to allow money to grow tax-differed until it annuitizes.
There are three types of annuities that determine how your earnings are credited based on how the funds are invested: fixed, variable, and indexed.
Upon annuitization, the insurance company initiates income payments to the owner, usually on a monthly basis. There are a few options for how long these payments continue.

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Fixed annuities provide a guaranteed minimum interest rate with fixed periodic payments.

Payments depend on the performance of the investments. Variable annuities are less stable but allow for greater returns if their investments do well.

Indexed annuities are fixed annuities that provide a return based on the performance of an equity index.

Income is paid for as long as you live. Payments stop upon your death.
Income is paid for as long as you live, but if you die before the "period certain," the annuity continues to pay your beneficiary until the end of that period.
Income is paid as long as either you or your beneficiary is alive. Payments may decrease after the first death.
If you die before the annuity begins to pay out, the contract value or the total premiums paid will be paid to your beneficiary, whichever is higher.