An annuity is a financial product that pays out a fixed stream of payments to an individual, and these financial products are primarily used as an income stream for retirees. Annuities are created and sold by financial institutions, which accept and invest funds from individuals. Upon annuitization, the holding institution will issue a stream of payments at a later point in time.

There are different types of annuities, but all boil down to essentially the same thing: An insurance contract that offers guaranteed income, often for life, and sometimes a shot at capital appreciation. There are five major categories of annuities*** — fixed annuities, variable annuities, fixed-indexed annuities, immediate annuities and deferred annuities. Which is best for you depends on several variables, including your risk orientation, income goals, and when you want to begin receiving annuity income.

For your particular situation, each type of annuity has advantages and disadvantages. Understanding annuities and even whether one of the many annuity options is a good idea for you can be a difficult question to answer. Best to leave it to us to lead you through the maze. Income for your retirement is important and sometimes confusing. We're here to help!

Related to an annuity is a private pension is a plan into which individuals contribute from their earnings, which then will pay them a private pension after they retire. It is an alternative to an employer pension. Usually individuals invest funds into saving accounts or mutual funds run by insurance companies. Private pensions are usually tax deductible.

***Fixed and Variable annuities are suitable for long-term investing, such as retirement investing.  Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 ½ are subject to a 10% IRS penalty tax and surrender charges may apply.  Variable annuities are subject to market risk and may lose value.