An annuity is a contract between you and the insurance company, where you make a lump-sum payment or series of payments over time.
In return, the insurer agrees to make periodic payments to you beginning immediately or at a specified date. Annuities typically offer tax-deferred growth and may include a death benefit that will pay your beneficiary a guaranteed amount, usually at least your principal.
There are generally three basic types of annuities:
- Fixed Annuity
- Variable Annuity
- Indexed Annuity
Variable annuities are securities regulated by the SEC. Fixed annuities are not securities and are therefore not regulated by the SE and can be compared to a bank CD and a life insurance policy rolled into one. Indexed annuities are a hybrid of a fixed and variable annuity.