Annuities are long-term insurance contracts that offer a fixed income stream for investors in the future, usually after retirement.
Annuities are an effective way to give people a steady cash flow after they retire. Individuals who wish to purchase an annuity contract can do so independently or through their employers. They can choose between a lump sum or a series of payments. An annuity works in two main phases:
Some of the different kinds of annuity plans are discussed below:
Here are the main ways an annuity is different from a 401(k):
A qualified employee annuity is an annual plan purchased by an employer for their employees. It is funded with pre-tax dollars and is not taxed.