In its simplest terms, an annuity is a contract between an individual (or married couple) and a life insurance company. You can purchase an annuity with a portion of your retirement savings in either a single payment or with multiple payments, depending on the type of annuity. Once you own an annuity, any growth in your account may be on a tax-deferred basis while you continue to have control of your money, as needed.Annuities can be an important part of a diversified retirement portfolio because they can ensure that your retirement income is protected even when there are downturns in the market.
So no matter how your other retirement investments perform, annuities can provide you with a source of protected lifetime income that few other financial products can offer.When you’re ready to take income, you may receive payments in a variety of ways depending on your needs and the type of annuity you purchased. You can choose to receive income immediately, or at a later date.Payments can be in lump sums of your choosing, in a series of payments for a specified period of time. You may choose to receive guaranteed payments for as long as you live.Certain types of annuities offer you the flexibility to receive protected lifetime income while maintaining access to your money.