Annuities are contracts between yourself and an insurance company, to whom you agree to make periodic payments or a lump sum payment. In return, you receive period payments from the insurance company starting either immediately or at a specified date. Annuities are either fixed, variable and indexed.
With fixed annuities, the insurance agrees to pay a specified interest rate while your account accumulates and that periodic payments will be a certain amount per dollar. Periodic payments may last indefinitely, such as your lifetime (or that of your spouse), or for a specified length of time. With indexed annuities, the insurance company credits you with a return based on changes in indexes such as the S&P 500. Indexed annuities also guarantee that the contract value stays above a specified minimum regardless of index performance. Variable annuities give you the option of investing your purchase payments into various investment options. The rate of return on your payments and amount of periodic payments depends on how well your investment options perform.
A qualified financial planner or elder law attorney may be able to provide more information on athe different types of annuities and advise as to whether or not an annuity is good retirement option for you.
