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Learn the basics of an annuity
Annuity Basics
Clear answers to help you make confident financial decisions.
What is an annuity?
An annuity is a contract between you (the annuity holder) and an insurance company (the annuity provider). The annuity holder makes monthly premium payments or a lump-sum payment to the annuity provider. The annuity provider then agrees to pay a predetermined monthly amount to the annuity holder for the rest of their life. Annuities are primarily used to secure a steady income during retirement.
How does an annuity work?
Annuities work by converting a lump sum payment into a series of payments that will be paid to the annuity holder for the remainder of their life. The payments can start at the time of purchase or at a future date. The rate of payout is determined by multiple factors.
What are the different types of annuities?
The five main types of annuities are:
Variable Annuity
Fixed Annuity
Deferred Annuity
Immediate Annuity
Indexed Annuity
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