How Do Annuities Work?


An annuity is a long-term investment contract issued by an insurance company. Annuities are a good idea if you are nearing retirement and are looking for a strategy to protect yourself from outliving your income. Like any investment, annuities have their pros and cons, but are considered safe overall.

Annuities are insurance products that provide a reliable, steady stream of payments to support your financial needs for the rest of your life or for a pre-determined number of years.

You can get a fixed annuity in which the payments are spelled out exactly ahead of time in the contract. Or you can get a variable annuity with the potential for higher – or lower – payments, depending on the performance of a traditional investment portfolio.

Annuities are not for everyone. But if you’re nearing retirement and need to ensure you can pay your living expenses after you’ve stopped working, you should consider if an annuity is right for you.

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