Last updated: March 28, 2016

What Is an Annuity?

An annuity is a contract with a life insurance company, charity, or trustee makes a series of income payments to you at regular intervals in return for a premium or premiums that you have paid. Annuities are an investment tool and can provide a fixed or variable rate of return. They can also start paying out immediately or at a later date.

Annuities are most often bought for future retirement income. An annuity can pay an income that can be guaranteed to last as long as you live.

An annuity is neither a life insurance policy nor a health insurance policy. It’s not a savings account or a savings certificate, and you shouldn’t buy an annuity to reach short-term financial goals.

Your value in an annuity contract is the amount in premiums you have paid, minus any applicable charges, plus any interest your premiums have earned.

Learn more:

Ways An Annuity Can Earn Interest

Options for Paying Premiums

When You Can Start Getting Money From Your Annuity

How Your Annuity Can Be Paid to You

Annuity Tax Considerations

Fixed and Variable Annuity Expenses

Annuity Terms Dictionary

Questions To Ask Before Signing