Turn part of your savings into income you cannot outlive.
An annuity is an insurance contract. In exchange for a premium, the insurer promises to pay you later — in a lump sum, over a period, or for life. The right kind depends on the job the money needs to do.
Two ways annuities are typically used
Accumulation
Grow money safely while deferring taxes. MYGAs work like a fixed-rate contract. Fixed indexed annuities link growth to a market index with a floor.
Retirement income
Exchange a premium for guaranteed payments that can last for life. The amount is based on your age, timing, payout option, and the insurer's pricing.
Six annuity jobs
Most products fall into one of these families. Click a card to learn how it works, when it fits, and what to watch out for.
MYGA & Fixed Annuities
A guaranteed rate for a set number of years.
You give the insurance company a premium for a fixed term. The company credits a declared interest rate for that entire term. Growth is tax-deferred, and the original premium is protected by the insurer's claims-paying ability.
Fixed Indexed Annuities
Growth tied to an index, with a floor.
Your credited interest is based partly on the performance of a market index, but the contract includes a floor that protects against index losses. Caps, participation rates, and spreads reduce the upside in exchange for that protection.
Income Annuities
A promised paycheck, guaranteed by the insurer.
You exchange a premium for a stream of payments that can last for a fixed period or for life. The amount depends on your age, gender, payment start date, payment option, and the insurer's pricing at the time of purchase.
Variable Annuities & RILAs
Direct investment accounts with optional guarantees.
Variable annuities hold subaccounts that can lose money. Registered Index-Linked Annuities (RILAs) offer a buffer or floor against losses in exchange for capped upside. These products may carry investment risk, fees, and surrender charges.
Longevity Annuities / QLACs
Income that starts later in life.
A qualified longevity annuity contract (QLAC) lets you use a portion of qualified retirement assets to buy income that starts well into retirement, reducing required minimum distributions on the amount used.
Buffered / Structured Annuities
Market participation with defined limits.
These contracts credit interest based on an index over a term, with a buffer or floor that absorbs the first portion of any index decline. Upside is typically capped, and terms vary by insurer.
Compare the main families
MYGA / Fixed
- What it does
- Fixed interest rate for a set term.
- Growth
- Declared rate; tax-deferred.
- Protection
- Original premium protected by insurer's claims-paying ability; no market decline risk.
- Income options
- Typically deferred; annuitization or withdrawals may be available.
- Liquidity
- Surrender charges during term; often 10% annual free withdrawal.
- Tax treatment
- Tax-deferred until withdrawn.
- Best for
- CD-like safety with tax deferral.
Fixed Indexed
- What it does
- Interest linked to an index with a floor.
- Growth
- Capped or participation-limited index upside; no direct market loss.
- Protection
- Floor protects against index losses; subject to cap/par/spread terms.
- Income options
- Income riders available for an additional charge or benefit base.
- Liquidity
- Surrender schedule; partial withdrawals usually allowed.
- Tax treatment
- Tax-deferred until withdrawn.
- Best for
- Growth potential with a downside boundary.
Income Annuity
- What it does
- Premium exchanged for guaranteed payments.
- Growth
- Not a growth vehicle; payout depends on age, gender, and timing.
- Protection
- Payments backed by the insurer's claims-paying ability.
- Income options
- Life, period certain, joint life, cash refund, and other options.
- Liquidity
- Generally low; premium is largely irrevocable.
- Tax treatment
- Partly taxable; non-qualified has exclusion ratio.
- Best for
- Covering essential expenses you cannot outlive.
Variable / RILA
- What it does
- Market-linked subaccounts or index exposure.
- Growth
- Full market upside potential, subject to fees and caps.
- Protection
- Variable: investment risk. RILA: buffer/floor may limit losses but not eliminate them.
- Income options
- Guaranteed benefit riders may be available for an extra charge.
- Liquidity
- Surrender charges; subaccount transfers may have limits.
- Tax treatment
- Tax-deferred until withdrawn.
- Best for
- Investors comfortable with market risk.
When an annuity may fit — and when it may not
Often a fit
- • You want a guaranteed piece of retirement income.
- • You prefer a declared rate to market volatility.
- • You are willing to trade some liquidity for guarantees.
- • You are comparing the annuity to a CD or Treasury ladder.
Often not a fit
- • You may need the full premium back within a few years.
- • You want full market upside without caps or participation limits.
- • You have not compared surrender charges and rider fees.
- • You are relying on the annuity for liquidity instead of growth or income.
Risks, taxes, and how to do your homework
Every annuity involves tradeoffs: surrender charges, tax treatment, fees, and the insurer's financial strength. Read the cross-family due-diligence guide before requesting a quote.
Read the due-diligence guideFrequently asked questions
Ready to talk through your situation?
Call or text 405-261-4033