For Consumers

What is an annuity?

"You were my last hope and came through, going beyond the call of duty to help me. The intervention on my behalf saved me thousands of dollars"
~ D.P.
DP says thanks

It’s an insurance product you buy to save a significant amount of money and it offers a way to reduce taxes, and/or ensure a steady flow of income.

It's a contract between you and an insurance company. People buy annuities if they:

  • Need to save significantly.
  • Want an investment that reduces taxes.
  • Want to ensure a steady flow of income.

How annuities work

  • You pay either a single premium or make payments for a set period of time in exchange for a future income.
  • They should increase in value and be income-tax free.
  • You can request to receive payments in a lump sum or in periodic fixed amounts.
  • A popular payout option is "lifetime income with 10 years certain." This means the annuity pays a monthly income for the life of the annuitant or for 10 years, whichever is longer

What are the benefits of an annuity?

Annuities provide three main benefits:

  • Death benefits: The basic death benefit offers a guarantee that when you die, the insurer - at a minimum - will pay out the amount you paid in.
  • Living benefits: People often buy annuities with retirement in mind, because annuities can pay out in lump-sum amounts or provide a guaranteed income for as long as they live.
  • Tax deferral: You aren't taxed on any interest, dividends or capital gains that accumulate inside of your annuity contract until you take a withdrawal. However, if you withdraw money prior to age 59 1/2, you may be subject to an additional 10% penalty tax.