Annuities are a hot topic in the financial world, and they have both fans and critics. As with any investment or insurance product, annuities are appropriate for some people’s situations and not for others. The information in this section will help you decide whether an annuity may be right for you.

So, what are annuities, exactly?

An annuity is a type of insurance contract. Very simply, here’s how it works: In exchange for an up-front lump sum or series of payments, the insurance company promises to pay you income on a regular basis for a period of time you choose, which can even be for the rest of your life.

Suppose a relative leaves you an inheritance, and you’d like to put it away to help fund your retirement. Or maybe you’d like to begin a steady stream of retirement income with your Individual Retirement Account (IRA). In both of these instances, buying an annuity might be an option.

When determining the amount of money you want to place in an annuity, make sure that you will not need to withdraw it during the contract’s surrender period. Why? Because annuity contracts have early withdrawal penalties. You’ll have to weigh the benefits of your annuity contract and having an annuity as an income source against having immediate access to all of your money in the annuity.

The type of annuity you purchase will determine when and how much money you’ll receive on a regular basis, and how long you’ll continue to receive those regular payments.

For details on the different types of annuities, check out the following links:

It’s important to choose the type of annuity that’s right for you, so you can start getting payments when you need them. A retirement income checkup can be a great way to discuss options about your next steps in planning your retirement income.