What an annuity is
An annuity is a contract between you and an insurance company. You pay a premium, either a lump sum or a series of payments, and the insurer agrees to credit interest, make income payments or both, according to the contract's terms. Annuities are long-term contracts meant for goals like retirement, not short-term savings.
This page covers fixed, fixed indexed and income annuities, which are insurance products. Variable annuities are securities and are not covered here.
Common types
- Fixed annuity: credits a declared interest rate for a set period.
- Fixed indexed annuity: credits interest based partly on a market index, subject to limits such as caps or participation rates. Your money is not invested directly in the index. Surrender charges and optional rider fees can apply.
- Immediate income annuity: turns a lump sum into income payments that start right away, for a set period or for life.
- Deferred income annuity: income starts at a future date you choose.
Who looks at annuities
- People approaching or in retirement who want to set aside part of their savings for a predictable purpose
- Retirees who want steady income for essential bills alongside Social Security or a pension
- Savers who want tax-deferred growth on money they won't need for many years
What to understand first
- Annuities are long-term contracts. Terms vary by product and carrier.
- Most have surrender charges if you take out more than the allowed amount in the early years, though many allow a limited penalty-free withdrawal each year.
- Fees, rates, caps and payment options differ by product and carrier. Optional riders, such as income riders, may cost extra.
- Earnings are taxed as ordinary income when withdrawn, and withdrawals before age 59½ may also be subject to a 10% federal tax penalty.
- Annuities are insurance products, not bank products. They are not FDIC-insured.
- Guarantees depend on the claims-paying ability of the issuing insurer.
How Matt helps
Annuity contracts vary widely in rates, caps, surrender periods, rider costs and income options. Matt compares contracts from the insurers he represents, explains how each one works and helps you decide whether an annuity makes sense for part of your savings, or not at all. He is a licensed insurance agent and does not provide financial, investment, tax or legal advice, so please talk with a qualified professional about your situation.
Serving Mooresville and the Lake Norman area
Whether you've lived around the lake for decades or recently retired here, Matt can help you understand your options. He works with families across Iredell County and the Lake Norman area, including Mooresville, Troutman, Statesville, Cornelius, Davidson, Huntersville and Denver, and he is also licensed in 16 other states and Washington, DC.
Annuity disclosures: Guarantees are based on the financial strength and claims-paying ability of the issuing insurance company. Annuities are long-term products; surrender charges may apply to early withdrawals, and withdrawals before age 59½ may be subject to a 10% federal tax penalty. Annuities are not FDIC-insured. Product features and availability vary by insurer and state. This page is general information, not tax, legal or investment advice.