Annuities are among the most misunderstood retirement products. These guides explain every major type with the same standard as the rest of this site: primary sources from the SEC, FINRA, NAIC, and IRS, dated, with the sources listed at the bottom. We cover what annuities do, what they cost, and the situations where they may not be the right fit.
Annuity guides
Start with the type, then the terms, income features, taxes, liquidity, alternatives, and safety. Unsure of a word? See the glossary.
Types of Annuities Explained
Fixed, indexed, variable, income, and longevity annuities: who regulates each, who carries the risk, and what to ask.
Read the guide →How Fixed Indexed Annuities Work
Caps, participation rates, spreads, and the zero floor in plain English, with worked examples from FINRA.
Read the guide →Annuity Income Riders Explained
Lifetime withdrawal benefits, the extra cost, why the income number differs from your account value, and what to ask.
Read the guide →Income Annuity Payout Options
Life only, period certain, refund, and joint and survivor choices, how they are taxed, and why the choice is hard to undo.
Read the guide →How Annuities Are Taxed
Earnings-first withdrawals, the 10% additional tax, income payments, 1035 exchanges, and what beneficiaries owe.
Read the guide →Annuity Surrender Charges, Withdrawals, and Free Look
How long the money is tied up, what you can take out each year, and how to change your mind after you buy.
Read the guide →Annuities Inside an IRA or 401(k)
What the SEC says about tax deferral, the 10% additional tax, required withdrawals, and QLACs.
Read the guide →What Happens to an Annuity When the Owner Dies
Death benefits, the five-year and ten-year rules, spousal continuation, and what beneficiaries owe in tax.
Read the guide →Annuities Compared with CDs, Treasuries, and Bonds
Who backs each promise, how much access you keep, inflation, taxes, and how to compare.
Read the guide →When an Annuity May Not Be the Right Choice
Short time horizons, liquidity needs, high costs, retirement accounts, and replacing a contract.
Read the guide →Are Annuities Safe? Guaranty Limits, Ratings, and Complaint Checks
What backs the guarantee, your state guaranty limit, how to read a financial strength rating, and how to check the company and the agent.
Read the guide →Annuity Glossary: 50 Terms in Plain English
Definitions from the SEC, FINRA, NAIC, and IRS, with the source for each.
Read the guide →Questions to ask about any annuity
These come from regulator consumer guidance. Ask them of anyone, including us.
- Do I understand the risks of this annuity, and am I comfortable with them? (NAIC)
- How will it help me meet my goals and time horizon, and what does it give me other than tax deferral? (NAIC)
- Does it have a guaranteed minimum interest rate, and what is it? (NAIC)
- If it has riders, do I understand how they work and what they cost? (NAIC)
- What are all the fees, charges, and adjustments? (NAIC)
- How much can I take out each year without a surrender charge, and is there a limit on total withdrawals? (NAIC)
- Do I intend to keep the money here long enough to avoid surrender charges, tax penalties, and adjustments? (SEC)
- What is the insurer's financial strength and reputation? (SEC)
- Does the contract allow the company to change caps, participation rates, or fees? (FINRA)
- How are you compensated for this sale? (NAIC, FINRA)
- Have I talked to a tax professional about how this changes my taxes? (NAIC)
- If I am replacing an existing annuity, what will I lose and what will it cost? (SEC, FINRA)
- How will my chosen survivors receive payment if I die? (NAIC)
How we approach annuity education
- Neutral first. We explain fixed, indexed, variable, income, and longevity annuities, and when none of them may fit.
- Sources you can check. Every figure links to a regulator or the IRS.
- Disclosure. Nazim Lokhandwala is a licensed insurance professional (NPN 21223861) who offers fixed and indexed annuity products. He does not offer variable annuities or registered index-linked annuities. See the About page.
- Not advice. This is education. Guarantees depend on the insurer, and product features and rules vary by state.