Annuities can play different roles in a retirement strategy, from helping protect principal to creating a source of income. Understanding the basics can help you decide what questions to ask.
A contract designed for long-term goals
An annuity is a contract with an insurance company. Depending on the type you choose, it may be designed to help accumulate money, provide future income, or offer certain guarantees.
Not all annuities work the same way
Fixed, fixed indexed, and variable annuities have different features, risks, costs, and growth potential. Understanding those differences matters before deciding whether one belongs in your retirement strategy.
Income can be part of the plan
Some annuities can be structured to provide income for a specified period or even for life, depending on the contract and options selected.
There are trade-offs to understand
Annuities can include surrender periods, withdrawal limitations, fees, tax considerations, and other contract provisions. Guarantees are generally subject to the claims-paying ability of the issuing insurer.
The bigger question: Does it fit your plan?
An annuity is one financial tool, not a retirement plan by itself. The important question is how its features fit alongside your income needs, other assets, time horizon, liquidity needs, and goals.