Annuities FAQs

An annuity is a contract between a buyer and a financial institution, usually an insurance company. A buyer will usually pay a monthly sum of money toward the principal, and in return, the insurance company will provide payments to the buyer (whether in a series of payouts or a one-time lump sum). Annuities are meant to provide a stream of income over a period until the buyer’s death. They accumulate interest, which can provide the buyer more money.

Annuities are tax-deferred, which means taxes are not taken out until the money is withdrawn, even while interest accrues on the savings.

Those close to retirement age are great candidates for an annuity. Anyone looking to build up their savings nest egg in a low-risk setting should consider purchasing an annuity.

It depends on the status of your annuity policy and settlement options that you choose. Some annuities cease payments after the death of the annuity owner, while others may continue to provide payments to a beneficiary.