Annuities are investment products sold by insurance companies, allowing for lump sum or installment investments that grow over time. They are an excellent choice for retirement planning due to the stable and dependable income they provide during retirement years. The most significant benefit of an annuity is the fixed monthly payments to the investor once it is converted to cash, providing extra income that is crucial, particularly since social security may not be sufficient in the future.

So how do annuities work? 

An annuity is a contract between an insurance company and an individual. The insurance company accepts payment from the individual investor in a lump sum or a series of payments. The insurance company then invests that money in various investment vehicles and provides regular disbursements to the individual immediately or at some point in the future. The goal of an annuity is to provide a steady income stream, typically during retirement.

Would An Annuity Be A Good Investment For You?

Annuities provide a guaranteed income stream, making them a good investment for individuals looking for extra retirement income. While no one can predict the future of our economy, interest rates, or the job market, annuities are an attractive addition to your retirement planning. They are not a get-rich-quick plan, but they offer moderate growth and stability, making them a helpful tool for people concerned about running out of money in retirement.

Conclusion

It is important to note that annuities have pros and cons like any other investment savings tool. We highly recommend speaking with a financial professional before deciding about your investments. An annuity is a financial product that offers a guaranteed income stream, typically for retirees. Whether or not an annuity is right depends on your financial situation and goals. Withdrawals are commonly used for retirement to help individuals avoid outliving their savings. However, since the invested cash is illiquid and could incur withdrawal penalties, younger individuals or those with cash needs should refrain from using this financial product. Before purchasing an annuity contract, consulting with a professional is essential, as they often come with complex tax considerations.