Retirement Annuities

An annuity is a long-term investment designed for retirement purposes. It can guarantee a stream of income that may help you maintain a comfortable lifestyle for the rest of your life.

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Why Choose a Retirement Annuity?

An annuity is a long-term investment designed for retirement purposes. An annuity has an accumulation phase as well as a payout phase. When annuitized, it can guarantee a stream of income that may help you maintain a comfortable lifestyle for the rest of your life. Many people choose annuities as a way to get guaranteed income in retirement that is tax-deferred.

Benefits of a Retirement Annuities

Guaranteed Income

Tax Benefits

Unlimited Contributions

Ability to Customize

Long-Term Care Insurance Riders

Guaranteed Rate of Return

Types of Retirement Annuities

Fixed Annuity

Guarantee growth based on a minimum interest rate for the life of the annuity.
Insurance company may periodically increase or decrease the rate based on the market for a specified time period — though it would not go below the guaranteed minimum interest rate.
Good for those who want to minimize risk and want a guaranteed payout.

Variable Annuity

Lets you choose one or more investment options, called subaccounts, to potentially grow your funds.
There is a greater possibility for growth as you can invest in stocks, bonds and mutual funds within the subaccounts.
This comes with an investment risk of loss of both the principal and earnings.
You can choose from moderate to aggressive growth options — or a combination of these.

Retired woman enjoying her morning coffee by the beach

Choose the Type of Annuity That's Right For You

The type of annuity that's best for you depends on whether you are saving for retirement or living in retirement.

Benefits	Fixed Annuity	Variable Annuity
Tax-Deferred No taxes owed on contract earnings until withdrawn or distributed	Checked	Checked
Guaranteed Interest Rate Minimum interest rate guaranteed for life of contract	Checked	NotChecked
Aggressive Risk Tolerance Greater risk exposure in return for greater growth potential	NotChecked	Checked
Conservative Risk Tolerance Lower risk exposure in return for greater stability	Checked	NotChecked
	Fixed Annuities	Variable Annuities

Common Annuity Questions

One reason annuities are included as a possible financial option is to provide tax advantages.

The money you contribute to the annuity grows tax-deferred.
Annuities have compound growth, meaning all funds in the account continue to earn interest — even interest on interest already paid. That sum of money grows faster when it's tax-deferred because there's more money to grow. The taxes are then paid on earnings (not the principal) during the payout period.
There are other tax advantages to non-qualified annuities. There's no mandate for you to withdraw money from your annuity at a certain age — so the funds can continue to grow tax-deferred.
You can also decide the amount and timing of the payments you take for tax purposes.

Now, annuities offer some flexibility for payout.

Often an annuity is "annuitized," which means that the annuity is converted into regular payments. This could be for a specific time period — like 10 years — or it could be paid out over your lifetime.
Some annuities can also continue paying out funds to a surviving beneficiary.
Another way to get funds from an annuity is via withdrawals. These are lump-sum payments made at your discretion.

Keep in mind, however, that pre-tax payments and annuity earnings are subject to income tax upon withdrawal, and withdrawing funds before the age of 59 1/2 generally incurs a 10 percent penalty tax from the Internal Revenue Service.

The payouts and recipients of the income are part of something known as the annuity structure.

The owner enters into a contract with the insurance company for the annuity.
The owner can then choose to be the recipient of the income (known as the annuitant) or they can designate someone else to receive that income.
The owner can also decide if there will be someone to receive the subsequent income once the annuitant dies (known as an annuitant beneficiary).

Learn More About Retirement Annuities

Start with these educational articles to help empower you to make more informed decisions about your financial future.

6 Annuity Benefits to Consider

How Do Annuities Work?

What Are the Different Types of Annuities?

What Is an Immediate Annuity?

What Is a Deferred Annuity & How Does It Work?

What is a Charitable Gift Annuity?

How Does an Annuity Death Benefit Work?

Claiming Your Inheritance: Annuity Options for Beneficiaries

What Is a Flexible Premium Deferred Annuity?

What Is a Single Premium Annuity?

What Is a Joint Annuitant?

5 Questions to Ask Before Choosing a Single Premium Immediate Annuity

5 Questions to Ask Before Choosing a Fixed Indexed Annuity

What Happens to an Annuity When You Die?

What Is an Income Rider & Why Would You Include One?

Understanding a Qualified vs. Non-Qualified Annuity

How Are Annuities Taxed?

10 Things to Consider When It Comes to Divorce & Annuities

Annuities Explained: 5 Myths Debunked

Why Western & Southern?

When you're planning how to create a financially secure retirement, you may want to consider annuities from a company with a history of stability. With our financial ratings from widely regarded independent agencies, Western & Southern has become one of the strongest life insurance groups. We have knowledgeable financial representatives available to help you with your annuity needs.

Financial Strength

Longevity & Stability

Financial Ratings

Annuity Terms

Understanding common annuity terms can help you make educated decisions about your finances. To help you sort through the differences, here's an annuity glossary with some of the essential terms you should know.

Immediate

With an immediate annuity, you purchase it from an insurance company, and you begin receiving income payments from your annuity immediately. That might be as soon as one month, or within the next year, depending on your contract.

Deferred

Deferred annuities allow you to keep your money in an annuity contract. You can often let the money sit to potentially earn interest for many years until you're ready to start drawing income or taking withdrawals.

Fixed

A fixed annuity is perhaps the easiest type of annuity to understand. You place money into the contract, and the insurance company pays you interest at a fixed, guaranteed rate.

Variable

Variable annuities fluctuate with value gains and losses in financial markets. The earnings you receive from your variable annuity will depend on how those investments perform, and it is possible to lose money if the investments decrease in value. You can often choose investments within the contract.

Indexed

An indexed annuity typically offers a guarantee on your investment along with potential market index. For example, some contracts prevent you from losing money while providing growth potential through a market index such as the S&P 500. If the index performs well during specific periods, you might benefit from those gains to a limited degree and earn slightly more in your annuity.

Single-Premium

With a single-premium annuity, you only make one premium payment into the contract. For example, when you purchase an immediate annuity, you pay a lump sum and begin taking income.

Flexible-Premium

With flexible-premium contracts, you can add funds to your annuity multiple times. For example, you might establish monthly premium payments, or you might pay a lump sum at the end of every year (or whenever you choose). The more you put in, the more you'll potentially have later, depending on the gains or losses in your contract.

Rider

A rider is an optional feature that you can add to an annuity contract. Riders might provide growth guarantees, income guarantees, enhanced death benefits or other features. Not all annuities have riders, and those features typically come with additional costs, so consider speaking with a financial representative to determine which riders might make sense for you.

Annuitize

When you annuitize, you convert assets in your annuity contract into a stream of regular payments. This could be for a specific time period or it could be paid out over your lifetime.

Period Certain

If you're concerned about dying shortly after annuitizing, you can select a period certain. During that period, the insurance company pays you or your beneficiaries, regardless of when you die.

For example, you might choose a 10-year period certain. If you die in the year following annuitization, your beneficiaries continue to receive payments for nine more years.

Payout Phase

During the payout phase, an annuity contract pays income monthly, annually or on any other schedule available in the contract. Payments might last for your lifetime or for a specified number of years.

Subaccount

With variable annuities, a subaccount is an investment option available in the contract. Those options may have different risk and return characteristics, allowing you to choose an investment strategy that fits your needs and goals.

Surrender Charge

A surrender charge is a fee that insurance companies charge to discourage you from taking withdrawals shortly after purchasing certain types of annuities. The amount you pay is typically a percentage of your withdrawal, and surrender charges often decline over time until they're completely eliminated.

Surrender Period

The surrender period is a specified number of years, and if you withdraw too much from an annuity contract during this time period, you must pay a surrender charge. Not all annuities have surrender periods, and they may be four years, 10 years or another term.

Beneficiary

The beneficiary receives assets in your annuity after your death. By designating a beneficiary, you might make the process of transferring assets faster and easier.