What is an annuity?

In a nutshell, an annuity is a contract between you and an insurance company in which you make a lump sum payment or series of payments and in return you get steady stream of income that starts immediately or at some pre-set date and continues for life or some pre-set time period.

Funds accrue on a tax-deferred basis, and like 401(k) contributions, can only be withdrawn without penalty after age 59-1/2 – though the income you get from the annuity is subject to income tax.

«Back [link_list]