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https://www.annuity.org/annuities/
Submission: On June 05 via manual from BE — Scanned from DE
Submission: On June 05 via manual from BE — Scanned from DE
Form analysis 6 forms found in the DOM
/search/
<form class="c-site-search-bar__form" action="/search/">
<label class="c-form__label u-sr-only">Search</label>
<input type="hidden" name="an_campaign">
<input class="c-form__control c-site-search-bar__input" id="header_search" type="text" placeholder="Type here to search..." name="query" aria-label="Search">
<button class="c-button c-button--accent c-site-search-bar__button c-form__submit" aria-label="Search" aria-controls="header_search" data-tracking="Nav_Search_A|Search" type="submit"> <i class="o-icon o-icon--search"></i>
<span class="u-sr-only">click to open search box</span>
</button>
</form><form id="inline-spia" class="c-form c-form-inline-spia js-validateForm js-spiaCalculatorForm" data-location="inline-spia-form" data-onsubmitfn="spiaCalculatorForm">
<div class="c-form__submit-error" aria-live="assertive" style="display:none">Sorry there was an error. Please wait a moment and try again.</div>
<div class="c-form__network-error" aria-live="assertive" style="display:none;">Sorry there is a continuing error in our system. Please call us using the phone number listed on this page. </div>
<div class="c-form__lightbox"></div>
<div class="c-form__submit-animation"></div>
<fieldset class="c-form__step is-active">
<h4 class="calculator__title calculator__title--primary">Estimate Your Monthly Lifetime Income From an Immediate Annuity:</h4>
<div class="c-form__group js-formGroup">
<label class="c-form__label c-form__label--tooltip" for="investment_amount_7">Premium Amount? <div class="c-form__tooltip" tabindex="0" role="tooltip" aria-label="What is the dollar amount of your single lump-sum payment?">
<i class="o-icon o-icon--question"></i>
<span class="c-form__tooltip-text">What is the dollar amount of your single lump-sum payment?</span>
</div>
</label>
<select class="c-form__control" name="investment_amount" id="investment_amount_7" aria-label="Premium Amount?" required="required">
<option value="">Please select an option</option>
<option value="12500"><$25,000</option>
<option value="37500">$25,000 - $50,000</option>
<option value="150000">$50,000 - $250,000</option>
<option value="375000">$250,000 - $500,000</option>
<option value="750000">$500,000 - $1,000,000</option>
<option value="1000000">>$1,000,000</option>
</select>
</div>
<div class="c-form__group js-formGroup">
<label class="c-form__label c-form__label--tooltip" for="date_of_birth_12">Date of Birth <div class="c-form__tooltip" tabindex="0" role="tooltip"
aria-label="Annuity providers base income benefits on an annuitant's life expectancy, which they determine using your age and sex.">
<i class="o-icon o-icon--question"></i>
<span class="c-form__tooltip-text">Annuity providers base income benefits on an annuitant's life expectancy, which they determine using your age and sex.</span>
</div>
</label>
<input class="c-form__control" autocomplete="bday" pattern="[0-9]{2}/[0-9]{2}/[1-2]{1}[0,9]{1}[[0-9]{2}" title="Please enter a valid birthday that is 18 or older in mm/dd/yyyy format." max="2005-06-05" min="1901-06-05" name="date_of_birth"
id="date_of_birth_12" type="date" aria-label="Date of Birth" required="required" placeholder="mm/dd/yyyy" maxlength="100">
</div>
<div class="c-form__group js-formGroup">
<label class="c-form__label c-form__label--tooltip" for="gender_47">Sex <div class="c-form__tooltip" tabindex="0" role="tooltip"
aria-label="Your sex is a key factor in determining your life expectancy, which annuity carriers use to calculate your income benefits from an immediate annuity.">
<i class="o-icon o-icon--question"></i>
<span class="c-form__tooltip-text">Your sex is a key factor in determining your life expectancy, which annuity carriers use to calculate your income benefits from an immediate annuity.</span>
</div>
</label>
<select class="c-form__control" name="gender" id="gender_47" aria-label="Sex" required="required">
<option value="">Please select your sex</option>
<option value="Male">Male</option>
<option value="Female">Female</option>
</select>
</div>
<div class="c-form__group">
<div class="c-form__buttons c-form__buttons--center">
<button class="c-button c-button--secondary js-trackClicks" type="submit">Calculate Monthly Income</button>
</div>
</div>
<div class="c-tcpa">
<div class="c-tcpa__description">
<p>*The dollar amount from this calculator is an estimate based on user-entered data. This estimate does not constitute a binding agreement between you and Annuity.org or its partners. We strongly urge you to consult with a financial advisor
before purchasing an annuity.</p>
</div>
</div>
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<div>
<label size="14px" color="#2c2c2c" class="sc-gzVnrw jNjBQL">Email <span class="sc-dnqmqq iFTUZ">*</span></label><input autocomplete="Email" aria-label="Email" id="fieldEmail" maxlength="200" name="cm-ydxitk-ydxitk" required="" type="email"
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<button size="16px" color="#2c2c2c" type="submit" class="js-cm-submit-button c-button c-button--on-page-form js-trackClicks sc-iAyFgw dPWDS"> STAY IN THE KNOW </button>
</form>POST /FormParser.php
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<div class="c-form__submit-error" aria-live="assertive" style="display:none">Sorry there was an error. Please wait a moment and try again.</div>
<div class="c-form__network-error" aria-live="assertive" style="display:none;">Sorry. Please call <span class="js-phoneSwap">855-528-3093</span>. There is an issue with our system. Our team has been notified. </div>
<div class="c-form__lightbox"></div>
<div class="c-form__submit-animation"></div>
<fieldset class="c-form__step is-active" data-step="1">
<div class="c-form__status">
<div class="c-form__status-step active"><span>Step 1</span></div>
<div class="c-form__status-step " data-stepchange="2"><span>Step 2</span></div>
<div class="c-form__status-step "><span>Verification</span></div>
</div>
<div class="c-form__group js-formGroup">
<label class="c-form__label" for="qualifying_answer_3">What information are you looking for?</label>
<select class="c-form__control" name="qualifying_answer" id="qualifying_answer_3" aria-label="What information are you looking for?" required="required">
<option value="">Please select an option</option>
<option value="Investing In Annuity Or Adding Income Stream">Investing in an annuity or adding an income stream</option>
<option value="Annuity Rates">Annuity rates</option>
<option value="Retirement Planning">Retirement planning</option>
<option value="Wealth Management">Wealth management</option>
<option value="General Information">General information</option>
<option value="Other">Other</option>
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<input type="hidden" name="qualifying_question" value="What information are you looking for?">
<div class="c-form__group js-formGroup">
<label class="c-form__label c-form__label--tooltip" for="investment_amount_84">How much are you looking to invest into an annuity or another financial product? <div class="c-form__tooltip" tabindex="0" role="tooltip"
aria-label="There is no minimum amount required to purchase an annuity, though the national average is $150,000.">
<i class="o-icon o-icon--question"></i>
<span class="c-form__tooltip-text">There is no minimum amount required to purchase an annuity, though the national average is $150,000.</span>
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</label>
<select class="c-form__control" name="investment_amount" id="investment_amount_84" aria-label="How much are you looking to invest into an annuity or another financial product?" required="required">
<option value="">Please select an option</option>
<option value="12500"><$25,000</option>
<option value="37500">$25,000 - $50,000</option>
<option value="150000">$50,000 - $250,000</option>
<option value="375000">$250,000 - $500,000</option>
<option value="750000">$500,000 - $1,000,000</option>
<option value="1000000">>$1,000,000</option>
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<label class="c-form__label" for="household_income_88">What is your household income annually?</label>
<select class="c-form__control" name="household_income" id="household_income_88" aria-label="What is your household income annually?" required="required">
<option value="">Please select an option</option>
<option value="35000"><$50,000</option>
<option value="60000">$50,000 - $75,000</option>
<option value="85000">$75,000 - $100,000</option>
<option value="110000">>$100,000</option>
</select>
</div>
<div class="c-form__group js-formGroup">
<label class="c-form__label" for="form_answer_1_69">Are you a professional financial advisor or insurance agent?</label>
<select class="c-form__control" name="form_answer_1" id="form_answer_1_69" aria-label="Are you a professional financial advisor or insurance agent?">
<option value="">Please select an option</option>
<option value="true">Yes</option>
<option value="false">No</option>
</select>
</div>
<input type="hidden" name="form_question_1" value="Are you a professional financial advisor or insurance agent?">
<div class="c-form__buttons c-form__buttons--center">
<a href="" class="c-button c-button--accent" data-stepchange="2">Next Step</a>
</div>
</fieldset>
<fieldset class="c-form__step " data-step="2">
<div class="c-form__status">
<div class="c-form__status-step " data-stepchange="1"><span>Step 1</span></div>
<div class="c-form__status-step active"><span>Step 2</span></div>
<div class="c-form__status-step " data-stepchange="3"><span>Verification</span></div>
</div>
<div class="c-form__group js-formGroup">
<label class="c-form__label" for="full_name_55">Full Name</label>
<input class="c-form__control" autocomplete="name" pattern="^[^\s\d]+ [^\d]+" title="Please enter a first and last name. Example: Jane Doe. Numbers are not accepted." name="full_name" id="full_name_55" type="text" aria-label="Full Name"
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<div class="c-form__group c-form__group--archer-s1e5 js-formGroup">
<label class="c-form__label" for="f_name">Full Name</label>
<input class="c-form__control" autocomplete="off" tabindex="-1" name="f_name" id="f_name" type="text" aria-label="Full Name">
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<label class="c-form__label" for="email_9">Email</label>
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<label class="c-form__label c-form__label--tooltip" for="date_of_birth_64">Date of Birth <div class="c-form__tooltip" tabindex="0" role="tooltip"
aria-label="Annuity providers base income benefits on an annuitant’s life expectancy, which they determine using your age and gender.">
<i class="o-icon o-icon--question"></i>
<span class="c-form__tooltip-text">Annuity providers base income benefits on an annuitant’s life expectancy, which they determine using your age and gender.</span>
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<input class="c-form__control" autocomplete="bday" pattern="[0-9]{2}/[0-9]{2}/[1-2]{1}[0,9]{1}[[0-9]{2}" title="Please enter a valid birthday that is 18 or older in mm/dd/yyyy format." max="2005-06-05" min="1901-06-05" name="date_of_birth"
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<label class="c-form__label" for="state_92">State</label>
<select class="c-form__control" autocomplete="address-level1" name="state" id="state_92" aria-label="State" required="required">
<option value="">Select a State</option>
<option value="AL">Alabama</option>
<option value="AK">Alaska</option>
<option value="AZ">Arizona</option>
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<option value="NH">New Hampshire</option>
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<option value="NM">New Mexico</option>
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<option value="OH">Ohio</option>
<option value="OK">Oklahoma</option>
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<option value="SD">South Dakota</option>
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<option value="TX">Texas</option>
<option value="UT">Utah</option>
<option value="VT">Vermont</option>
<option value="VA">Virginia</option>
<option value="WA">Washington</option>
<option value="DC">Washington, D.C.</option>
<option value="WV">West Virginia</option>
<option value="WI">Wisconsin</option>
<option value="WY">Wyoming</option>
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</div>
<div class="c-form__group c-form__group--half js-formGroup">
<label class="c-form__label" for="zip_code_74">Zip Code</label>
<input class="c-form__control" autocomplete="postal-code" pattern="[0-9]{5}" title="Please enter a 5 digit zip code. Example: 12345" name="zip_code" id="zip_code_74" type="text" aria-label="Zip Code" required="required" placeholder="44455"
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</div>
<div class="c-form__buttons c-form__buttons--center">
<a href="" class="c-button c-button--accent" data-stepchange="3">Next Step</a>
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<div class="c-form__status">
<div class="c-form__status-step " data-stepchange="1"><span>Step 1</span></div>
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<div class="c-form__status-step active"><span>Verification</span></div>
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<span id="js-errorMessageOTP">To make sure our licensed insurance professional can reach you, please enter and verify your phone number below.</span>
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<label class="c-form__label c-form__label--tooltip" for="phone_1">Phone Number <div class="c-form__tooltip" tabindex="0" role="tooltip"
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<i class="o-icon o-icon--question"></i>
<span class="c-form__tooltip-text">Annuity.org verifies your phone number by send a verification code through text message. When you recieve your verification code, please add it to the field, verify and submit to have a representative
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<i class="o-icon o-icon--question"></i>
<span class="c-form__tooltip-text">Annuity.org verifies your phone number by send a verification code through text message. When you recieve your verification code, please add it to the field, verify and submit to have a representative
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<strong class="c-tcpa__title">
<i class="o-icon o-icon--lock c-tcpa__icon"></i> Privacy & Contact Agreement </strong>
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contacted by one or more of Annuity.org’s trusted partners (including autodialed and prerecorded calls or text/SMS messages). Msg. and data rates apply. Your consent to text messaging is not required for a consultation and you may opt-out
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</form>POST #
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<div class="c-form__network-error" aria-live="assertive" style="display:none;">Sorry there is a continuing error in our system. Please call us using the phone number listed on this page. </div>
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Home / Annuities
ANNUITIES
An annuity is a financial instrument issued and backed by an insurance company
that provides guaranteed monthly income payments for the life of the contract,
regardless of market conditions. You can customize an annuity based on a variety
of options, including how long you think you’ll live, when you want your
payments to start and whether you want to leave your income stream to a
beneficiary after your death.
PURCHASE AN ANNUITY TODAY
Learn how an investment today can provide guaranteed income for life.
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Wendy Swanson, RICP®, CLTC®, NSSA® | 0:45 What is an annuity?
Wendy Swanson, Retirement Income Certified Professional™, explains what an
annuity is.
* Written By
Jennifer Schell
Jennifer Schell
Financial Writer
Jennifer Schell is a professional writer focused on demystifying annuities
and other financial topics including banking, financial advising and
insurance. She is proud to be a member of the National Association for Fixed
Annuities (NAFA) as well as the National Association of Insurance and
Financial Advisors (NAIFA).
Read More
* Edited By
Savannah Hanson
Savannah Hanson
Senior Financial Editor
Savannah Hanson is an accomplished writer, editor and content marketer. She
joined Annuity.org as a financial editor in 2021 and uses her passion for
educating readers on complex topics to guide visitors toward the path of
financial literacy.
Read More
* Financially Reviewed By
Thomas J. Brock, CFA®, CPA
Thomas J. Brock, CFA®, CPA
Expert Contributor
Thomas Brock, CFA®, CPA, is a financial professional with over 20 years of
experience in investments, corporate finance and accounting. He currently
oversees the investment operation for a $4 billion super-regional insurance
carrier.
Read More
* Updated: May 4, 2023
* 16 min read time
* This page features 27 Cited Research Articles
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York Times.
Our expert reviewers review our articles and recommend changes to ensure we are
upholding our high standards for accuracy and professionalism.
Our expert reviewers hold advanced degrees and certifications and have years of
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Cite Us
How to Cite Annuity.org's Article
APA Schell, J. (2023, May 4). Annuities. Annuity.org. Retrieved June 5, 2023,
from https://www.annuity.org/annuities/
MLA Schell, Jennifer. "Annuities." Annuity.org, 4 May 2023,
https://www.annuity.org/annuities/.
Chicago Schell, Jennifer. "Annuities." Annuity.org. Last modified May 4, 2023.
https://www.annuity.org/annuities/.
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Why You Can Trust Annuity.org
Annuity.org has provided reliable, accurate financial information to consumers
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using plain, straightforward language.
OUR PARTNERSHIPS, VISION AND GOALS
We pride ourselves on partnering with professionals like those from Senior
Market Sales (SMS) — a market leader with over 30 years of experience in the
insurance industry — who offer personalized retirement solutions for consumers
across the country. Our relationships with partners including SMS and
Insuractive, the company’s consumer-facing branch, allow us to facilitate the
sale of annuities and other retirement-oriented financial products to consumers
who are looking to purchase safe and reliable solutions to fill gaps in their
retirement income. We are compensated when we produce legitimate inquiries, and
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Annuity.org.
Annuity.org carefully selects partners who share a common goal of educating
consumers and helping them select the most appropriate product for their unique
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Additionally, Annuity.org operates independently of its partners and has
complete editorial control over the information we publish.
Our vision is to provide users with the highest quality information possible
about their financial options and empower them to make informed decisions based
on their unique needs.
Annuities can be optimized for income or long-term growth, but they are not
short-term investment strategies. These products appeal to people whose
objectives include long-term financial security, retirement income,
diversification and principal preservation.
Key Takeaways
* An annuity is an insurance product designed to provide consumers with
guaranteed income for life.
* The type of annuity you purchase determines your future annuity payments.
* The primary benefits of buying an annuity include principal protection, the
potential for guaranteed lifetime income and the option to leave money to
your beneficiaries. Some annuities may also be optimized to help pay for
long-term care.
WHAT IS AN ANNUITY?
An annuityAnnuityAn insurance product that earns interest and generates periodic
payments over a specified period of time, typically with the purpose of
providing income in retirement. is a customizable contract issued by an
insurance company that converts an investor’s premiums into a guaranteed fixed
income stream.
More specifically, an annuity contract is a legally binding, written agreement
between you and the insurance company that issues the contract. This contract
transfers your longevity riskLongevity RiskLongevity risk is the risk that you
will outlive your retirement savings. — the risk of you outliving your savings —
to the insurance company. In exchange, you pay premiumsPremiumA regular payment
made to keep insurance coverage active. as outlined in the contract.
Expand
An annuity contract can help you save for retirement or turn your savings into a
stream of retirement income.
HOW DO ANNUITIES WORK?
Annuities work by converting a lump-sum premium into a stream of income that a
person can’t outlive. Many retirees need more than Social SecuritySocial
SecuritySocial Security is a federal benefits program for retirees in the United
States, funded by taxes. and investment savings to provide for their daily
needs.
Annuities are designed to supply this income through a process of
accumulationAccumulation PeriodAn accumulation period is the period of time when
annuity premiums increase in value. and annuitization or, in the case of
immediate annuitiesImmediate AnnuityType of annuity that converts premiums to a
stream of income immediately. Also known as an income annuity, single premium
immediate annuity (SPIA), or deferred income annuity (DIA) an immediate annuity
has no cash value and withdrawals are generally not allowed before income
benefits begin., lifetime payments guaranteed by the insurance company that
begin within a month of purchase — no accumulation phase necessary.
In essence, when you buy a deferred annuityDeferred AnnuityAn annuity contract
with an accumulation phase and a payout phase. Deferred annuities begin
distributing income at a specified date in the future, typically 10 to 30
years., you pay a premium to the insurance company. That initial investment will
grow tax-deferred throughout the accumulation phase, typically anywhere from ten
to 30 years, based on the terms of your contract. Once the
annuitizationAnnuitizationThe process of converting the premiums and interest
earned on a deferred annuity to a stream of income through a series of periodic
payments., or distribution, phase begins — again, based on the terms of your
contract — you will start receiving regular payments.
Annuity contracts transfer all the risk of a down market to the insurance
company. This means you, the annuity owner, are protected from market risk and
longevity risk, that is, the risk of outliving your money.
To offset this risk, insurance companies charge fees for investment management,
contract ridersRiderA provision added to a contract., and other administrative
services. In addition, most annuity contracts include surrender periods during
which the contract holder cannot withdraw money from the annuity without
incurring a surrender charge.
Furthermore, insurance companies generally impose caps, spreads and
participation rates on indexed annuities, each of which can reduce your return.
Annuities Explained
Free-Look Period Most states require insurance companies to include a free-look
period that allows a buyer to cancel the contract without incurring a surrender
charge.
Riders Riders are addendums that allow the customization of basic annuity
contracts. It’s important that you understand the riders you select and are
aware of their additional costs.
Beneficiaries You can add a death benefit rider to your contract to ensure that
your beneficiary receives a portion of the contract value.
Fees and Commissions The fees and commissions for annuities vary by the type of
annuity. Fixed annuities generally have the lowest fees.
Taxation One of the most attractive features of annuities is their favorable tax
treatment from the IRS. If your annuity was purchased with money that you’ve
already paid taxes on, then only your earnings will be taxed when the money is
withdrawn.
HOW ARE ANNUITY RATES SET?
Annuity rates are set differently depending on the type of annuity. For example,
the issuing insurance company sets the rateAnnuity RateThe rate of growth,
expressed as a percentage, set by the insurance company at the start of the
annuity contract term. Depending on the type of annuity, the insurance company
may guarantee the interest rate for a year or longer, or the rate may fluctuate
with a stock market index. of a fixed annuity. They will guarantee this rate for
a set period, usually between three and 10 years.
Rate setting is more complicated for other kinds of annuity contracts whose
interest rates may vary throughout the term of the contract. A fixed indexed
annuity, for example, has both a fixed rate and a rate that’s tied to the growth
of an equity market index. The indexed rate may be set according to several
factors, including rate caps and floors, to keep the rate within a specified
range.
HOW ARE ANNUITIES TAXED?
Finance professionals widely recommend annuities to their clients for their
tax-deferred growth potential. Once you purchase the annuity, your investment
grows tax free for the length of the contract. You won’t owe taxes until you
receive income payments when the annuity matures.
The part of your annuity payout that is taxed depends on the type of annuity you
have. If you own a qualified annuity, you’ll pay income taxes on the full
withdrawal amount. Meanwhile, only earnings are taxed on non-qualified annuity
withdrawals.
HOW DO ANNUITIES PAY OUT?
Annuities come in two basic configurations: immediate or deferred.
The option you select will depend on your financial goals. If you want to begin
receiving annuity payments right away, you will choose an immediate annuity.
Alternately, if you would like to set your payments to begin at some point in
the future, you will purchase a deferred annuity and specify the start date in
your contract.
INCOME NOW
Immediate Annuities
--------------------------------------------------------------------------------
* Funded with a single lump-sum payment
* Guaranteed monthly payouts
* Supplement your retirement savings
Learn More
INCOME LATER
Deferred Annuities
--------------------------------------------------------------------------------
* Funded with a single lump-sum payment
* Guaranteed monthly payouts
* Supplement your retirement savings
Learn More
Christopher Magnussen | 0:25
How much guaranteed income can I expect to receive from an annuity each month?
Chris Magnussen, licensed insurance agent, explains how much guaranteed income
you can expect to receive each month from an annuity.
Read More: How Much Does A $100,000 Annuity Pay Per Month?
TYPES OF ANNUITIES
Different types of annuities exist to fit the diverse needs of the market. Your
personal goals and objectives will determine the type of annuity that is right
for you.
Expand
GUARANTEED INCOME
Fixed Annuities
--------------------------------------------------------------------------------
* Earns a guaranteed rate of interest for a set period of time
* Rate of interest may be guaranteed for a set period of time or may fluctuate
from anniversary to anniversary
* Backed by the insurance company that issued it
Learn More
GROWTH POTENTIAL
Fixed Indexed Annuities
--------------------------------------------------------------------------------
* Earns interest based on a market index, such as the S&P 500
* Doesn’t participate directly in the stock market and preserves premium
* Guaranteed minimum rate of return
Learn More
FLEXIBLE INCOME
Variable Annuities
--------------------------------------------------------------------------------
* Earns interest through investments you select within the annuity
* Does not guarantee a return but offers more growth potential
Learn More
STEP 1
STEP 2
Step 3
Step 4
Verification
HOW SOON ARE YOU RETIRING?
Within 5 Years
Within 10 Years
Already Retired
Other
Next
STEP 1
STEP 2
Step 3
Step 4
Verification
WHAT IS YOUR GOAL FOR PURCHASING AN ANNUITY?
Select all that apply
Accumulation
Income
Security or Premium Protection
Inheritance Planning
Other
Back Next
REASONS TO BUY AN ANNUITY
People buy annuities to create long-term income. While most often considered
financial solutions for older people who are close to retirement, annuities can
benefit investors of any age with a variety of financial goals.
Reasons to buy an annuity include:
* Long-term security
* Tax-deferred growth
* Principal protection
* Probate-free estate distribution
* Inflation adjustments
* Death benefits for heirs
Income annuities are generally suitable for people who are within a year of
retirement and want the security of guaranteed income. Remember, single premium
immediate annuities (SPIAs) begin paying out within a year of purchase. This
means there is no accumulation period as there is with deferred annuities.
For this reason, SPIAs are also beneficial for younger people who have inherited
a large sum of money and wish to protect the windfall from poor financial
management.
In contrast, deferred annuities are generally not recommended for people who
have short-term financial needs or younger people with more aggressive
investment strategies.
Wendy Swanson, RICP®, CLTC®, NSSA® | 1:00
When is the best time to buy an annuity?
Wendy Swanson, Retirement Income Certified Professional™, talks about the best
time to buy an annuity.
ANNUITY BENEFITS
One of the key benefits of an annuity is that it allows the investor to save
money without paying taxes on the interest until a later date. Annuities have no
contribution limits, unlike 401(k)s and IRAs.
Another significant benefit of annuities is the creation of a predictable income
stream to fund retirement. With an annuity, you don’t have to worry about
outliving your savings. This is a major advantage in the post-pension age.
Your reasons for investing in an annuity should align with your unique lifestyle
and financial situation.
Tax-Deferred Growth
You save money without paying taxes on the interest until a later date.
No Contribution Limits
Unlike 401(k)s and IRAs, you set the dollar amount you invest.
Fund Your Retirement
Annuities create predictable income streams for life.
Provide for Your Family
Death benefit riders allow you to transfer your money to your loved ones.
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ESTIMATE YOUR MONTHLY LIFETIME INCOME FROM AN IMMEDIATE ANNUITY:
Premium Amount?
What is the dollar amount of your single lump-sum payment?
Please select an option<$25,000$25,000 - $50,000$50,000 - $250,000$250,000 -
$500,000$500,000 - $1,000,000>$1,000,000
Date of Birth
Annuity providers base income benefits on an annuitant's life expectancy, which
they determine using your age and sex.
Sex
Your sex is a key factor in determining your life expectancy, which annuity
carriers use to calculate your income benefits from an immediate annuity.
Please select your sexMaleFemale
Calculate Monthly Income
*The dollar amount from this calculator is an estimate based on user-entered
data. This estimate does not constitute a binding agreement between you and
Annuity.org or its partners. We strongly urge you to consult with a financial
advisor before purchasing an annuity.
DISADVANTAGES OF ANNUITIES
Some consumers see sacrificing liquidity in return for lifetime financial
security as a disadvantage. Indeed, if your financial status or short-term goals
limit the amount of cash you have on hand, an annuity is probably not the right
solution for you. It wouldn’t make financial sense to purchase a valuable,
viable product if it’s not valuable and viable for you.
Other common concerns about the structure and design of annuities include:
* Commissions and fees
* Complexity
* Conservative returns (as compared with investment products)
* Loss of potential returns from other investments
The loss of potential returns is what’s known as “opportunity cost.” People
frequently cite opportunity cost as drawback. This objection is valid for people
with higher risk tolerance. For example, younger investors with longer time
horizons would most likely benefit from a more aggressive investment strategy
because they have time for their money to grow and could bounce back from
temporary market losses.
Older investors and retirees, on the other hand, need to assess opportunity
costs as they relate to their specific circumstances. It is less likely that
people in this age group would consider opportunity costs a disadvantage of an
annuity.
REDUCE YOUR OPPORTUNITY COST
For many investors, the main objection to annuities is the risk of losing access
to their money for the length of their contract. This means that in addition to
the possibility that you won’t be able to cover unexpected expenses, you may
miss the opportunity to take advantage of higher interest rates or to invest in
the stock market.
This is where your understanding of your long-term goals comes in. Your decision
to purchase — or sell — an annuity should be in alignment with your goals, and
you should be comfortable with having your money locked down for a modest payout
in exchange for guaranteed lifetime income.
To reduce your opportunity cost, consider a partial investment upfront. This
will allow you to reserve some of your savings for unplanned expenses and give
you the ability to capitalize on a potential rise in interest rates.
LEARN MORE ABOUT SELLING YOUR ANNUITY PAYMENT >
ANNUITIES VS. OTHER FIXED INCOME PRODUCTS
Annuities are often compared to other fixed income products, including life
insurance, certificates of deposit (CDs) and bonds. Let’s explore how annuities
stack up to these alternatives.
ANNUITIES VS. LIFE INSURANCE
While insurance companies issue both products, there are key differences between
annuities and life insurance. The major difference is that annuities provide
lifetime income for the annuitant with the option to pass on income to a
beneficiary after death, while life insurance traditionally serves as a death
benefit after the policy holder passes away.
Annuity contracts and life insurance policies are both tax-deferred investment
products, and some life insurance policies can grow over time like annuities do.
When an annuity matures, the income is usually distributed as a series of
payments on a set schedule. Life insurance benefits, on the other hand, are
generally distributed in a lump sum to the beneficiary of the policy.
Both products require a premium, which is what you initially pay to purchase the
annuity contract or the life insurance policy. However, the way companies
determine your premium is different for these two products. Annuity premiums are
calculated based on life expectancy, but life insurance premiums are determined
by the mortality of the insured.
Because of their differences, a sound financial strategy could include both an
annuity and a life insurance policy. Whether one or both products are right for
you depends on your long-term money goals.
ANNUITIES VS. CDS
Annuities and CDs are both considered very safe ways to grow your savings over
time. Both products provide a guaranteed rate of return over a set period.
Annuities and CDs also both favor protecting the investment’s principal over
aggressive growth.
There are some notable differences between the two products. CDs are short-term
investments offered by banks, while annuities are considered more long-term
products and are issued by insurance companies. Taxation on an annuity contract
doesn’t kick in until you withdraw payments, while CD interest is taxed
annually.
Annuities are more customizable than CDs because you can choose the terms of the
contract and add features like death benefit riders. CDs also tend to offer
lower interest rates than annuities because the terms are shorter.
Choosing between an annuity and a CD comes down to how soon you expect to need
the money you’re investing as principal. Annuities are preferable for long-term
savings goals like retirement. CDs, however, are well suited for saving for
shorter-term goals such as a house down payment.
ANNUITIES VS. BONDS
Bonds are like annuities in that both are purchased with lump-sum payments and
have an established date of maturity. A fundamental difference between annuities
and bonds is that annuity contracts are somewhat negotiable, while the terms of
bonds are not. You can add benefits or modify terms before you finalize an
annuity contract, but a bond indenture cannot be changed.
Annuities also have the advantage of being tax-deferred, while bond income is
taxable. In the long term, annuities typically show better rates of return than
bonds, and annuities tend to hold their carrying value better over time. The
value of bonds tends to decline when interest rates rise.
Bonds and annuities can both be important tools for growing your savings. When
choosing which product is right for you, consider the risks and rewards of both
financial vehicles and how they align with your own financial priorities.
ANNUITIES IN 2023
The economic climate of 2023 has made annuities attractive for consumers looking
to maximize their retirement savings. While individual annuity sales spiked 22%
in 2022, sales are expected to see a 14% increase in 2023, according to
Financial Advisor.
This is partially due to the SECURE 2.0 Act, which went into effect on Jan. 1,
2023. The law opened a new door for annuities in the retirement space, allowing
them to be offered as an investment option within 401(k) plans.
In addition, inflation continues to pose a major risk to retirees in 2023, but
annuities present a few solutions to this problem.
First, the growth rates of annuities, even the more conservative fixed
annuities, are typically higher than the returns on products like CDs or bonds.
An annuity can also be helpful for consumers looking to close the “retirement
gap,” in which your savings and retirement income aren’t enough to cover all
your expenses. Annuities offer guaranteed income for the lifetime of the
annuitant, and this can help supplement an existing retirement account if those
savings are not enough.
One type of annuity is especially good at combating the effects of inflation. An
inflation-indexed immediate annuity is tied to the movements of the Consumer
Price Index, which is the index used to measure inflation. You can further
customize an annuity to hedge against inflation by adding a cost-of-living
adjustment rider. This feature increases the monthly payouts of the annuity to
keep pace with inflation.
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IS AN ANNUITY A GOOD INVESTMENT?
To determine whether an annuity is a good investment, you must consider your
personal investment needs and goals. It’s also important to account for factors
like your age, risk tolerance and lifestyle.
Generally, the younger you are, the more risk you can tolerate. In this case,
you might invest in products with greater growth potential. The returns on
annuities are modest compared to stocks and other investment vehicles, but they
offer guaranteed growth over an extended period.
Annuities tend to be sound investments for older consumers preparing for
retirement. The modest returns annuities provide are balanced out by principal
protection and tax-deferred growth. Annuities also provide a stream of income
you can’t outlive, unlike other retirement solutions.
When deciding whether to invest in an annuity, weigh which characteristics of a
savings vehicle are most important to you. If you want a safe investment that
allows your money to grow tax-deferred and gives you the option to pass on your
investment to a beneficiary, an annuity might be the right choice.
HOW TO BUY AN ANNUITY
Annuities are issued by insurance companies, but most contracts are not sold
directly to the public from the company’s own agents. The majority of annuities
in America are purchased from distributors, brokerage firms, banks, mutual fund
companies and independent agents.
These distributors will work with you to negotiate your contract and help you
manage the contract as your annuity matures. You will primarily work with the
agent who sold you the annuity, though you may occasionally receive information
from the insurance company that backs the annuity.
Taking the first step towards purchasing an annuity is as easy as contacting us
now. We’ll put you in touch with one of our trusted partners for more
information on securing your financial future.
1. Contact Us
We’ll route you to a financial expert who specializes in annuities and
retirement planning.
2. Get a Free Consultation
Our trusted network of advisors will listen to you and guide you toward an
annuity that will allow you to achieve your goals.
3. Get Guaranteed Income for Life
Get peace of mind knowing you’ve made a smart financial decision by securing
a reliable income for your golden years.
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FREQUENTLY ASKED QUESTIONS ABOUT ANNUITIES
What are annuities?
Annuities are financial instruments that earn interest and provide a guaranteed
income stream through payments over a predetermined amount of time. Annuities
are often used to fund retirement and come in a variety of types that align with
different financial goals and risk tolerance.
How much does an annuity cost?
All annuities share similar fees, but the total cost of an annuity can differ by
type. When you purchase an annuity, you pay a premium that can be converted into
a fixed income stream. The annuity’s administrative fees offset the risks held
by the annuity provider, including market volatility. Your contract will outline
your financial obligations and the annuity’s growth rate.
What are the benefits of an annuity?
Benefits of annuities include a stream of income, tax advantages, tax-deferred
growth over time and contain no contribution limits. Annuities are primarily
used to supplement traditional sources of retirement income. In the event of
death, annuities also offer riders that allow you to transfer money to your
beneficiaries.
Are annuities safe?
Purchasing an annuity is among the safest options for long-term financial
planning. They are insurance products, so they experience less volatility with
market fluctuations, although some annuity types have higher risks — and higher
potential rewards — than others.
Are annuities insured?
Annuities are insurance products, and annuity providers are often insurance
companies. Although the annuity itself is not insured in the literal sense,
annuity owners are protected by state guaranty associations if the insurance
company defaults on payments.
Do annuities have beneficiaries?
You can designate one or more beneficiaries in your annuity contract if it has a
death-benefit provision. The beneficiary would inherit either a specific amount
or the remaining money in the annuity.
What’s the best age to buy an annuity?
The typical age for buying an annuity is between 45 and 75, but a multi-year
guaranteed annuity (MYGA) can be suitable for just about any age.
What is an annuity fund?
When you purchase an annuity, your premium is placed in an investment portfolio
called an annuity fund. This portfolio determines the rate of return you’ll earn
on your annuity.
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Last Modified: May 4, 2023
Written By
Jennifer SchellFinancial Writer
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Jennifer Schell is a professional writer focused on demystifying annuities and
other financial topics including banking, financial advising and insurance for
Annuity.org. She is proud to be a member of the National Association for Fixed
Annuities (NAFA) as well as the National Association of Insurance and Financial
Advisors (NAIFA).
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View Sources
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Be Better. Retrieved from
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On This Page
* What Is an Annuity?
* How Do Annuities Work?
* Immediate or Deferred
* Annuity Types
* Is an Annuity Right for Me?
* Benefits
* Disadvantages
* Comparing Annuity Alternatives
* Annuities in 2023
* Annuities as Investments
* Buying an Annuity
* Frequently Asked Questions
* Annuities
* 1035 Exchange
* Accumulation Period
* Annuitant
* Annuities & Divorce Laws
* Annuities Explained
* Annuitization
* Annuity Beneficiaries
* Fees & Commissions
* Payout Options
* Annuity Puzzle
* Rates
* Regulations
* Riders
* Scams
* Annuity Strategies
* Annuity Taxation
* Are Annuities Safe?
* Deferred
* FERS Supplement
* Free Look Period
* FAQs
* How They Work
* How Many Years Does an Annuity Last?
* How Much Does A $100,000 Annuity Pay Per Month?
* How To Find an Old Annuity
* Inheriting an Annuity
* How to Buy
* Qualified Longevity Annuity Contract (QLAC)
* Retirement
* Secondary Market
* Immediate
* Split-Funded
* State-By-State Guide to Annuities
* Tax Consequences
* Companies & Providers
* Types
* Annuity Funds
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