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What Is An Annuity


Answer for "What is an annuity?"

Earl Trammell
  Better Homes and Gardens

An annuity is a long-term, interest-paying contract offered through an insurance company or financial institution. An annuity can be \"deferred\" as a means of accumulating income while deferring taxes, or it can be \"immediate\" meaning it pays you income now at fixed or variable interest rates as long as you are living, contact your insurance agent for details on current rates.

The Opposite of Life Insurance
Annuities are sometimes described as the opposite of life insurance. Annuities protect you from living too long, while life insurance protects you from dying too soon. Meaning with an annuity you are paid as long as you live, but with a Life insurance policy you are only paid when you die.* With an annuity, the financial risk of living too long is transferred to the insurance company.
* some life insurance policies may allow you to collect money while living.

Banks, stockbrokers, savings and loan institutions and other financial service providers can sell annuities, but only insurance companies can issue annuities.

A Lifetime Income
With the average retirement period lengthening, annuities are increasing in importance. Only an annuity can pay you an income you can\'t outlive, even after all money you put into the annuity has been exhausted. Therefore, annuities can help you mange your cash flow, and provide a safe and competitive means to accumulate funds.



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