Individuals have questions about annuities – after all, they may have been advised to purchase an annuity by an insurance agent, financial advisor or friends and family as a way to maximize retirement income. The distinctions among annuities may not be clear, considering that there are hundreds of annuity products on the market today. Before an individual decides to purchase an annuity, he or she needs to ask some questions: What is an annuity? What are annuities used for? Should I buy an annuity?

An annuity is a contract between you and an insurance company, set up through your payment of a premium to the company. You can chose between a deferred annuity, which requires you to defer your payments for a set time period, and an immediate annuity, which offers you an income stream right away.

Deferred annuities are primarily used as a way to save and grow an initial principal deposit. One type of deferred annuity, the multi-year guaranteed, or CD-type annuity, guarantees an interest rate for a certain time period – three, five or even 10 years. At term end, the funds are available for withdrawal, or can be rolled over into a new annuity. Another annuity type is a fixed index annuity, also known as an equity index annuity. Instead of a guaranteed interest rate, a fixed index annuity’s interest rate is tied to the percentage change in a specified stock market index.

Immediate annuities function as a monthly (or quarterly, whichever payout frequency you choose) income payment to you. In return for your premium, you can receive payouts for life, a certain period of time or for joint life, which means that your spouse continues receiving payments even after you pass away.

Augmenting retirement savings is often an individual’s main goal for purchasing an annuity. Money to fund an annuity can come from many different sources: a maturing CD, liquid retirement savings such as a 401k or IRA, a savings account or even another annuity. With a fixed annuity, the principal and any interest earnings you accumulate are guaranteed, making a fixed annuity a safe, stable and attractive way to grow a nest egg.

To learn more about annuity options available to you, visit AnnuityLibrary.com, a one stop annuity comparison and shopping Web site for consumers. You can also call 1-800-998-4056 to speak to one of our Annuity Specialists.