What is an annuity?
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 in return the insurer agrees to grow your money, pay you income, or both, according to the contract's terms. Annuities are designed for long-term goals like retirement, not short-term savings.
The annuities discussed here are fixed, fixed indexed, and income annuities, which are insurance products. Variable annuities are securities and aren't covered on this page.
Common types of annuities
- Fixed annuity: earns a declared interest rate for a set period. It's issued by an insurance company, not a bank, and is not FDIC insured.
- Fixed indexed annuity: interest is credited based partly on the performance of a market index, subject to limits such as caps or participation rates. Your money isn't invested directly in the market, and your account value isn't reduced by index losses, though surrender charges and optional rider fees can still 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, which can help plan for later retirement years.
Who it's a good fit for
- People approaching or in retirement who want part of their savings protected from market drops
- Retirees who want predictable income to cover essential bills alongside Social Security or a pension
- Savers who want tax-deferred growth on money they won't need for many years
- Anyone worried about outliving their savings
Important things to understand
- Annuity guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.
- Annuities are long-term products. Most have surrender charges if you withdraw more than the allowed amount during the early years of the contract, though many allow a limited penalty-free withdrawal each year.
- Withdrawals of earnings are taxed as ordinary income, and withdrawals before age 59½ may be subject to an additional 10% federal tax penalty.
- Optional riders, such as lifetime income riders, may carry additional fees.
- Annuities are not bank deposits and are not FDIC insured.
Why use a local independent agent
Annuity contracts vary widely in rates, caps, surrender periods, rider costs, and income options. Matt can compare annuities from multiple insurance companies, explain how each one works, and help you decide whether an annuity makes sense for part of your savings, or not at all. There's no cost to talk and no pressure to buy.
Serving 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 clients in Mooresville, Cornelius, Davidson, Huntersville, Denver, Troutman, and nearby communities, and he's also licensed in 16 other states and Washington, D.C.
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.