Annuity
Annuities are contracts, not magic CDs
They can create a paycheck you cannot outlive, or park money with tax deferral. Surrender charges, fees, and income-rider math decide whether that is a good trade.
An annuity is a contract with an insurance company. You pay a premium (lump sum or series). The company later pays you, or your beneficiary, according to the contract. That can mean accumulation with tax deferral, a guaranteed withdrawal amount, or a life-only paycheck.
Annuities are not a substitute for an emergency fund. Money you may need next year rarely belongs inside a seven-year surrender schedule.
The main families
| Type | Often a fit when | Watch for |
|---|---|---|
| Immediate (SPIA) | Turning a lump sum into a paycheck that starts within a year. | Generally irreversible. Inflation can erode a level payment. |
| Fixed deferred | A declared rate for a term, with tax-deferred growth. | Surrender charges. Renewal rates after the guarantee period. |
| Fixed indexed | People who want a 0% floor on the crediting strategy and some link to an index. | Caps, spreads, and participation rates. Income riders add fees. Illustrations are not guarantees. |
| Variable | Owners who accept market risk in subaccounts for higher potential. | Account value can fall. Fees stack (M&E, funds, riders). |
Pros
- Tax-deferred growth until withdrawal (non-qualified contracts).
- Optional lifetime income that you cannot outlive, if you elect it.
- Death-benefit or return-of-premium features on many contracts.
- Can complement Social Security and pensions rather than replace investing entirely.
Cons
- Surrender charges and, on some products, market-value adjustments.
- Withdrawals before 59½ may face an IRS penalty on taxable gain.
- Income-rider fees can offset index credits in quiet markets.
- Complexity. If a contract cannot be explained in plain English, do not buy it.
We will ask what the money is for, when you need it, and what you already have in IRAs, pensions, and Social Security. If a CD, Treasuries, or simply leaving the 401(k) alone is the better answer, that is the recommendation.
Tell us when you are free to talk.
Text or call and we will compare plans against your situation — then send the details for you to review before anyone enrolls.