Learn about this unique investment tool.
As an investment product, an annuity is a financial instrument that pays out a sum of money to its owner over the course of a number of years.
Commonly Asked Questions
What is an Annuity?
An annuity pays out a sum of money to its owner over the course of a number of years. If you have an annuity, you’re guaranteed at least a certain amount of money every year until the annuity expires or you become deceased. This amount is a payment plus interest, which can accrue at different rates.
What are the most popular types of annuities?
1. Fixed annuities, which earn interest at a fixed rate set at the time you purchase the annuity.
2. Variable annuities, which earn interest at a rate tied to market trends that may increase or decrease over the life of the annuity.
Is an Annuity a good investment tool?
Annuities are a steady stream of income, but they often have lower returns than other investment tools. It’s possible to beat the guaranteed return, but not every annuity performs the same way. They are still useful as an investment tool if there’s a market downturn and you continue to receive the same interest rate.
When is an Annuity a good investment?
You can buy annuities for safety, long-term growth, or income.
For example, a fixed annuity might make an attractive alternative to a CD; a variable annuity might be bought for long-term, tax-deferred growth; and an immediate annuity is bought for income purposes.
In each of these cases, the insurance company that issues the annuity is ensuring some portion of the outcome. If you want to ensure part of the outcome, an annuity might be a good choice.