How Do Annuities Work?

Annuities are long-term financial products that are arranged for retirement purposes. In simple terms, they are contracts between a married couple (or an individual) and a life insurance company.

How It Works

Annuities are flexible retirement tools. Here is how they work in three simple steps: 

  1. You buy an annuity from a life insurance company.
  2. Your money can grow tax-deferred until you withdraw it. 
  3. You can turn your annuity into guaranteed income when you retire.

The Steps Explained

You buy an annuity by making a single lump sum paying, or in some instances, by making recurring payments over time. Then, the insurance company invests your payment so the amount earns interest. Depending on the type of annuity you choose, the interest may or may not alter the payments you get or the duration the annuity pays.

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Additional Benefits of an Annuity

Other benefits of an annuity may include:

  • Guaranteed death benefit
  • Protected lifetime income
  • Protection from market loss
  • A choice of income guarantees
  • Maintaining access to your money
Contact Us About Annuities

Turning 65 Solutions is here to answer any questions you may have about annuities. Call 800-515-4031 to speak with a financial expert.