The Details

Since an annuity is issued by an insurance company, they handle all the investment decisions. They’ll pay you the interest rate they promised, no matter how the investments perform.

Remember, one benefit of an annuity is a steady stream of income. And since the rate is guaranteed and fixed, you’ll know exactly what your income is going to be, which can be a huge relief.

(If you still want some growth potential but don’t want to give up the guarantee, you might want to look into an variable annuity.)

Why They're a Good Idea

• They offer a guaranteed rate of return on your investment.
• The money earned by the annuity won’t be taxed until you start receiving payments.
• If you need to access your money early, you can typically withdraw up to a certain amount each year without paying a fee.
• They let your money grow faster by having deferred taxes.

An annuity can also help make things easier for your spouse or children if you die. Usually, your estate would have to go through a legal process before your beneficiaries can access it. With an annuity, they won’t have to wait.

If this happens before you start receiving annuity payments, your beneficiary will get a “death benefit” that usually equals the total value of the annuity. If you’ve already started to receive payments, the remaining guaranteed payments will go directly to your beneficiary.

Factors to Consider

• You want the security of principal protection and guaranteed rates.
• You're concerned about outliving your money.
• You're changing jobs or retiring.
• You don't want to manage large amounts of money on your own.
• You make sure your spouse or children are taken care of financially.