How do annuities work?

There are usually two phases of a fixed annuity contract with an insurance company, the build-up phase and the income phase. During the build-up phase, the contract grows on a tax deferred basis which makes this kind of investment very competitive with others used to generate retirement income.

Beside tax deferral, annuities can create an income that you cannot outlive. This feature is very beneficial when planning for retirement. One of many retirees’ greatest fears is running out of money.