In the same way mutual funds simplify diversifying your investments, annuities simplify getting your money when you actually need it—in retirement. They're a way to help make sure you can have a steady stream of income, even if the market doesn't exactly perform the way you want it to.

Annuities work like this. You pay money to an insurance company, and then they invest it. Over time, they'll pay you back while offering tax advantages. You won't pay taxes until the earnings on the funds are paid out to you. You choose how much you'll contribute, when you want to start receiving payments, and how long they need to last.

The upside is that there aren't many surprises. There's an income you can count on month after month, and in a good market, some annuities earn positive returns for a higher payout.

• Fixed annuities
• Variable annuities
• Immediate annuities
• Equity-indexed annuities
• Market-value-adjusted annuities

• The minimum amount of the income payments is guaranteed.
• The money earned on the annuity won't be taxed until they start receiving payments.
• You can choose when the payments start.
• Some annuities offer lifetime distributions in the form of a life annuity, so your money never runs out.
• You can pick the type of annuity that fits your goal and investment style.

• People who want to plan their future income carefully
• Those who might want to begin receiving retirement income before their Social Security benefits take effect
• Those who want a lot of guidance with managing their money
• People who don't foresee needing to access their money until they start receiving payments from the annuity