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Annuities

Annuities

A fixed amount of money paid out each year.

The source can be money from:

  • An injury settlement
  • Inheritance
  • Lottery
  • Jackpot
  • Game show win
  • Retirement

How Annuities Work

  1. Put money into an account
  2. Money grows
  3. You get the money back

For retirement planning

Annuities are contracts between you and an insurance provider that allows you to put money away now, have it grow, and then have it paid back to you during your retirement years.

Two options for depositing and payout

  1. Lump sum
  2. Structured payments

Tax Benefits

You don’t pay any taxes!

Life Insurance vs. Annuity

Both contracts, one major difference:

  • Annuity provides funds upon retirement
  • Life insurance provides funds upon death

How the Annuity Works

Immediate annuity

A lump sum of money → Insurance company → A series of regular payments

Deferred annuity

Investments made into → Annuity gradually over time + Interest = Fixed payments

Fun Facts

If you win the lottery, you will choose how to be paid:

  • Cash (a one-time, lump sum payment)
  • Annuity (one immediate payment followed by 26 annual payments)

Wheel of Fortune gives away annuities as prizes.


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