Financial Literacy for Everyone

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Wouldn’t it be nice if you could continue receiving a steady stream of income even during your retirement? Well, with an annuity you can. An annuity is an investment agreement in which you pay an insurance company a specified amount of money and the insurer invests it for you with the promise to pay you back on a future date or series of dates. You can choose to receive your annuity income monthly, quarterly, annually or in a single, one-time payment.


You have two options for how your annuity is created:

  • Immediate – You pay a lump sum upfront and begin receiving payments, usually about 30 days later.
  • Deferred – You contribute money into your annuity account over time and then convert your savings into an income stream — annuitized — when you retire.

There are three ways in which you can choose how your annuity earns a return:

  • Fixed – The insurance company invests the money for you and pays a guaranteed rate of interest; there’s no need for you to track the stock market’s ups and downs.
  • Variable – You can invest the money into a preselected list of funds, called sub-accounts, and your returns can increase and decrease based on your investment choices.
  • Indexed – Your contributions are linked to a market index with the potential to grow your investment. And you are guaranteed a minimum rate, usually 2–3 percent of interest, as a form of financial protection in a downward market.

Annuities can sound like they are great moneymakers, but be aware that there are high fees and limitations to the earning potential associated with this kind of investment. You can learn more by meeting with an insurance agent or qualified financial planner.