An Annuity is a financial product that provides a steady income stream, typically used for retirement purposes. It is a contract between an individual and an insurance company, whereby the individual makes a lump-sum payment or series of payments into the contract, in exchange for regular disbursements, either immediately or in the future. 

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How Do Annuities Work

Well, it really depends on the type of annuity:

• Some annuities are designed to accumulate funds over a period of time for long term goals, through either a lump sum contribution or through periodic payments.

• Other annuities focus on making periodic payments to the individual, starting either immediately or later.

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Types of Annuities

• Fixed Annuities: Provide regular, guaranteed payments. They are considered low risk since the payout amount does not change.

• Variable Annuities: Payments can vary based on the performance of investment options chosen by the individual. They carry higher risk and potential for higher returns.

• Indexed Annuities: Returns are based on a specified equity index, offering a balance between fixed and variable annuities, with moderate risk.

• Immediate Annuities: Payments begin almost immediately after a lump-sum payment is made.

• Deferred Annuities: Payments begin at a future date, allowing the money invested to grow over time.

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Who Should Consider Annuities?

An Annuity might be a smart choice if you are looking to:

• Ensure a stable income stream that you can’t outlive.

• Protect against the risk and volatility of the stock market.

• Receive tax-deferred growth on investments.

• Customize your retirement income plan according to your personal financial needs and risk tolerance.

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A Howe Financial retirement professional can help you work through all the details.