Annuities explained: income you cannot outlive
Four words cause most of the confusion: fixed, indexed, immediate, deferred. The contract details do the rest.
- An annuity is a contract with an insurer. You pay a premium. The company promises income, crediting, or both, as written.
- Immediate means checks start soon. Deferred means later. Fixed means a stated rate. Indexed means interest using an index formula with a cap and a floor.
- Surrender charges, rider fees, and how the “income base” differs from the cash surrender value are where people get surprised.
The four words
Immediate. You trade a lump sum for a check that starts within a year. Useful when you need income now and can live with limited liquidity. Deferred. Money sits and is credited for years before you turn on income. Fixed. A declared rate, like a CD with an insurance wrapper and different tax rules. Indexed. Interest linked to an index, with a floor and a cap — not stock market ownership.
What we refuse to skip
How long you are locked. What a living spouse gets. Whether the income rider charges 1% of a number that is not your cash value. Whether a bonus is recaptured. If those answers are ugly, we say the product is ugly.
Coverage page: annuities.
Educational only. Products, features, and availability vary by carrier and by state. This is not an offer of insurance, tax advice, or a recommendation of any specific policy. Licensed in AL, AZ, AR, CO, ID, LA, MS, MT, NC, NM, SC, TN, UT, WV, WY. Iron Tusk Insurance Group, LLC. National Producer Number #22311194.
Bring the annuity you were shown.
We will separate the guaranteed income from the illustration.