An annuity allows a customer to deposit money (premiums) with a life insurance company that can earn interest and grow on a tax-deferred basis with the agreement that the insurance company will then provide a series of payments back to the customer at regular intervals.
People typically purchase annuities to provide or supplement the retirement income they will receive from Social Security, pension benefits, investments, and other sources. You can convert your annuity into a stream of income that can then be paid over a fixed period or for your lifetime. You can take withdrawals of varying amounts when you need the income.
There are generally two different types of annuities:
Provides income payments that normally begin within a year after the premium is paid.
Provide income payments that begin later, often after many years. Deferred annuities are designed for long-term savings purposes.
- Available to purchase using a single lump sum, or with flexible premiums over time.
- When it comes time to take income from your deferred annuity, you will have many options available to meet your needs.