How Annuities Provide Retirement Income
Pending compliance review · Last reviewed October 11, 2026
Short answer: An annuity is a contract with an insurer. You pay a lump sum or premiums, and the insurer agrees to credit value and/or make payments under the contract’s terms.
Immediate and deferred
Immediate annuities begin income soon after purchase. Deferred annuities accumulate value first, with income starting later.
Lifetime income
Some contracts or optional riders can provide income for life, which may help address the risk of outliving savings. Riders often have fees, and payout depends on age and contract terms.
Trade-offs
In exchange for guarantees, you usually give up some access to your money and some growth potential. Guarantees depend on the insurer’s claims-paying ability.
Key terms
Frequently asked questions
Do I lose my money if I die early?
It depends on the contract. Many offer death benefits or payout options that continue to beneficiaries, sometimes in exchange for lower income.
Related guides
Annuities are long-term insurance contracts. They are not bank deposits, not FDIC insured, and guarantees depend on the issuing insurer’s claims-paying ability and contract terms. Surrender charges, fees, and taxes may apply. Not tax or legal advice.