What exactly is an annuity? In its simplest form, an annuity is an agreement between a consumer and an insurance company to pay out a steady amount of cash over time. Generally, annuities are used as a retirement vehicle to ensure regular income in later years. When one buys an annuity, they either pay a lump sum or a regular schedule of deposits. After a scheduled date, the insurance company will begin to pay out a distribution for either a fixed period (e.g. 20 years) or until the annuity owner and their spouse dies.
Planning for retirement. For some people, retirement goals are simple: accumulate enough money to maintain their current lifestyle after they retire. In the face of longer lifespans and challenges such as inflation and market risk, it’s important to plan carefully.
Higher risk products have the potential for greater returns, however, there is a possibility of losing your money. Lower risk options guarantee a certain amount of interest, but they don’t offer the interest-crediting potential of the higher risk options. Somewhere in between, there are annuity products, which can provide a higher return with protection from risk.