An annuity is a contract between you, you and your spouse or entity and a life insurance company. This contract is purchased with a portion of your retirement saving in either a lump sum or with multiple payments, depending on the type of annuity you elect. The money that is in your annuity will grow and this increase in capital may be tax deferred. People love annuities because their portfolio is protected even when the stock market drops. While your remaining portfolio is subject to downturns in the market, annuities protect your capital and ensure that you receive income that few other financial vehicles can provide.

“Annuities offer income that is protected from stock market downturns.”

When you begin to receive payments, this is called “annuitization” or the annuity “annuitizes.” Depending on how it is set up, you can receive income (payments) immediately or in a series of payments over a specified period. There is an option to continue to receive guaranteed payments for as long as you live.

Certain types of annuities offer you the flexibility to receive protected lifetime income while you maintain access to your money. This is one of the major advantages of annuities. You will not find this benefit in many investment & retirement vehicles.

Annuities have been a reliable and trusted option for centuries. During the Great Depression, annuities saw a spike in popularity as stock market volatility threatened retirement savings and Americans were looking to protect their assets with more conservative financial products.

Today, with fewer people covered by traditional pension plans, annuities can fill a critical gap in retirement portfolios by providing a guaranteed monthly check for as long as you live, no matter how the markets perform.

“Annuities are long-term financial products designed for retirement purposes. Early withdrawals may be subject to withdrawal charges. Partial withdrawals may reduce benefits available under the contract. Withdrawals of taxable amounts are subject to ordinary income tax and, if taken prior to age 59½, an additional federal tax may apply. Optional income protection features are subject to additional fees, requirements and other limitations.  Contract and optional benefit guarantees are backed by the financial strength of the issuing insurer.” 

Things to consider

  1. What role can protected lifetime income from an annuity play in my retirement portfolio? What can it do that other investments cannot?
  2. What types of annuities are there? What guarantees do they provide? Which one best meets my needs, investment objectives and risk tolerance?
  3. What are the specific costs or expenses for this annuity?
  4. What are the specific benefits of this annuity? How can my money grow?
  5. Are there add-on benefits to customize this annuity to my specific needs? If so, what do they cost?
  6. What are the associated risks if I purchase this annuity? Can I lose money?
  7.  How long will my money be invested? How can I assess the financial strength of the insurance company?
  8. How and when can I obtain my income? What happens if I need to withdraw some or all my money earlier than expected?
  9. What other restrictions should I be aware of before I consider purchasing this annuity?
  10. How am I taxed on any withdrawals or income taken? How is that different from other investments or financial products?


Income and Payments for your future