Taking the Mystery Out of Annuities


Couple in the garden with their dogGuaranteed lifetime income is not only an important part of any sound retirement strategy, it’s also the fundamental principle of an annuity.

So why don't annuities show up in more peoples' retirement portfolios? It's largely a matter of misunderstanding and confusion about the true value an annuity can deliver.

For more information about the common misunderstandings associated with annuities, read Dismantling the Myths of Annuities.


Annuities are uniquely designed to deliver a guaranteed income. But they are one of the most misunderstood investment products and are often the target of unfair criticism.

How to choose an annuity: low costs, strength and stability, transparency, trusted adviceLet's clear up some of the confusion and start with a basic explanation of how annuities work:

  • An annuity is best thought of as a contract between an individual and a financial services firm that is also registered as an insurance company.
  • Under this contract, you commit funds to a firm that manages the annuity, and it invests your funds as well as those of other investors.
  • When you decide you want to start receiving annuity distributions (typically when you are 59½ or older, in order to avoid tax penalties), the firm is obligated to make payments to you.

Many annuities offer a broad range of accumulation and payout options, serving people of different ages, incomes and financial situations.

And annuities offer flexibility not found in many other investment products — in some cases, you have the freedom to reallocate your assets if there is a change in your financial situation or in market conditions.

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Guaranteed retirement income

An annuity can help make meeting your retirement goals simple.

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