“Annuities are sometimes described as the flip side of life insurance; whereas life insurance is designed to provide financial protection against dying too soon, annuities provide a hedge against outliving your retirement savings; while life insurance is designed to create principal, an annuity is designed ultimately to liquidate principal that has been created, typically in regular payments over a number of years,” articulated Stephen Blakely in Nation's Business.

An annuity is an insurance contract; an interest-bearing financial contract that provides an income stream in return for an initial payment. The contract combines the tax-deferred savings and investment properties of retirement accounts with the guaranteed-income aspects of insurance.

In an annuity, an individual gives the insurance company money which may grow tax deferred and then can be distributed back to the individual in several ways. The defining characteristic of any and all annuity contracts is the option for a guaranteed distribution of income until the death of the person or persons named in the contract.

Annuities can be bought from insurance providers, banks, mutual fund companies, stockbrokers, and other financial institutions. These are in most cases long-term investment vehicles; these are usually held for a number of years in order to reap financial benefits.

Annuities are good option for small business owners in planning for their own retirement or in providing an extra reward or incentive for valued employees. There are several forms of annuities, and all forms of annuities involve different costs and have different properties. Annuities can be classifies in the following categories.

Nature of the underlying investment – fixed or variable

Primary purpose – accumulation or pay-out (deferred or immediate)

Nature of pay-out commitment – fixed period, fixed amount, or lifetime

Tax status – qualified or nonqualified

Premium payment arrangement – single premium or flexible premium

Annuities are regulated by various jurisdictions. Different annuities are used for many different objectives. One common objective is tax deferral. Annuities help money grow tax deferred meaning the owners do not pay taxes on gains until a withdrawal is made.

For more info on annuities, click here or call an Annuity Specialist at AnnuityForLife.com, 1-888-261-6237