Annuities

An annuity is a financial product offered by insurance companies, designed to provide a steady stream of income for a predetermined period or for the remainder of a person's life. It is essentially a contract between an individual, known as the annuitant or the policyholder, and an insurance company.  It is also the only financial retirement contract that can guaranty a lifetime income stream that never changes.

When you purchase an annuity, you make either a lump-sum payment or a series of payments to the insurance company. In return, the insurance company agrees to make regular payments to you over a specified period. The frequency of payments can be monthly, quarterly, annually, or at any other interval specified in the annuity contract.

Annuities are often used as a retirement income tool, providing a consistent cash flow during retirement. They can be categorized into two main types: immediate annuities and deferred annuities.

1. Immediate Annuities: With an immediate annuity, you start receiving payments immediately after making the initial lump-sum payment. The payments continue for a fixed period or for as long as you live, depending on the terms of the contract.
2. Deferred Annuities: Deferred annuities have an accumulation phase before the payout phase begins. During the accumulation phase, you can sometimes make regular contributions to the annuity, allowing your money to grow tax-deferred. The payout phase starts at a predetermined date in the future, such as retirement, and you start receiving regular payments.
3. Special Annuities: A special class of deferred annuities is called a Multi-Year Guaranty Annuity (MYGA) which is an alternative to a bank Certificate of Deposit.  MYGA’s generally offer higher interest rates and tax advantages.  They are typically available from 3-10 years in guaranty period.

Annuities can have various features and options, including guaranteed minimum income benefits, death benefits, inflation protection, and investment-linked annuities. The specific terms and conditions of an annuity can vary, so it's essential to carefully review and understand the terms before purchasing one.

It's worth noting that annuities are not suitable for everyone and should be considered as part of a broader financial plan. It's recommended to consult with a financial advisor who can provide personalized guidance based on your individual circumstances and goals.