An annuity is a contract between you (the annuity owner) and an insurance company. In return for your payment, the insurance company agrees to provide either a regular stream of income or a lump sum pay-out at some future time (generally, once you retire or pass age 59 1/2).
For the right investor, annuities can be exceptional complements to a well-rounded portfolio — they have the advantage over traditional retirement plans of allowing you to invest unlimited funds, tax-deferred. However, annuities are not for everyone.
It’s a cold, hard world out there, and you need to be informed to get the best return on your money. Annuity FYI suggests that prior to making a purchase you consider the following about the annuity, the insurance company issuing the annuity, and the broker selling it.