An annuity comes in many forms, but a simple definition is that an annuity is a contract that converts a sum of money into a series of periodic payments for an agreed upon period of time. An annuity can be thought of as a financial vehicle that converts a pool of money into a stream of income. Annuities are most useful in addressing the financial planning needs of people in or approaching retirement. Annuities are unique in the financial world because they can provide protection against the risk or outliving one’s assets (longevity risk) by guaranteeing income payments in perpetuity or any other selected amount of time. Annuities can be viewed as a type of personal pension plan. Social Security is similar to an annuity in that money contributed over the course of one’s working years is converted into a series of periodic payments that provide income during retirement.
1) Take your time – an annuity purchase is a huge decision. There is no need to rush into the decision the moment you retire. In fact, the time of retirement is probably a bad time since there are so many other things taking place with the transition.
There are tips, suggestions and recommendations that can be gleaned from the content throughout this buying guide.
This section, however, can serve as a quick reference source for those who prefer short and simple lists.
All annuities involve payments from an insurance company to you. With some annuities the payments are fixed, and with other annuities the payments are variable. Assuming that you purchase an annuity from an insurance company in the United States, you will receive payments in U.S. dollars.
