Understanding Annuities
What is an annuity, and how does it work?
An annuity is a contract with an insurance company that can provide a stream of income, often used in retirement planning. You may pay a lump sum or a series of payments, and the contract can later pay you income in a lump sum, over a set period, or for life. Terms, fees, guarantees and suitability vary by product and carrier — and an annuity may not be right for everyone.
The Basics
Annuities in plain English
Think of an annuity as a way to convert money you have now into income you can receive later. You make one or more payments to an insurance company, and the contract spells out how and when it pays you back.
Some annuities begin paying income soon after you fund them. Others are designed for the future, letting your money grow until you're ready to receive income. Each type works differently and carries different considerations.
Things to Understand
Trade-offs to weigh
Annuities can offer the potential for dependable income, but they also come with trade-offs: fees, surrender charges, limited access to your money, and terms that vary by product. The guarantees depend on the issuing insurance company.
That's why we help you understand the specifics — and why we never imply an annuity is automatically suitable for everyone. A conversation is the best way to figure out whether one fits your plan.
- Terms, fees and guarantees vary by product and carrier
- Some limit access to your money during the contract
- Suitability depends on your goals, timeline and overall finances
- An annuity may not be right for everyone
Curious whether an annuity fits your plan?
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