An annuity allows a client to deposit money (premiums) with an insurance company that can earn interest and grow tax-deferred with the agreement that the insurance company will then provide a series of payments to the client at regular intervals.
People generally buy annuities to provide or supplement the retirement income they will receive from Social Security, pension benefits, investments, and other sources.
You can turn an annuity into an income stream that can then be paid off over a fixed period or for life. You can make withdrawals of variable amounts when you need the income.
Generally, there are two different types of annuities:
Provides income payments that normally begin within one year after the premium is paid.
Provide income payments that start later, often after many years. Deferred annuities are designed for long-term savings purposes.