Annuities are financial products typically used by retirees looking for guaranteed income streams.

People with annuities (annuitants) tend to skew older, with most approaching retirement age

However, others also invest in an annuity contract when they come into a large sum of money, like an inheritance. There are lots of myths surrounding annuities, such as the idea that they're only for the wealthy.

Annuity owners are mainly middle-class people looking to supplement their savings

Gallup surveyed people who own annuities and found that annuity owners skew older and that the overwhelming majority bought the contracts to guarantee income during their retirement years. The annuity owners also said the contracts provide them with peace of mind.

Some argue that annuities are particularly good options for women

Women live longer than men, meaning they'll likely be retired for longer. Annuities can provide them with a guaranteed income stream during their retirement years, even if the rest of their retirement plan doesn't last.

While annuities can guarantee an income for risk-averse investors, they may play it too safe for others

Whether or not an annuity is the right investment option depends on the buyer’s unique needs. People who plan to retire soon are more likely to opt for the lower-risk investment, but there may be opportunity costs for people seeking higher returns.

Annuity sales have climbed, topping $430B in 2024, as retirees look to pad their income

Retirees are seeking guaranteed income that will last for as long as they live, weather market downturns, and preserve wealth.

Annuities can help protect investors from outliving their retirement savings

While an annuity is also a contract between an individual and an insurance company, a life insurance policy differs in that it protects the beneficiaries in the event of the policyholder’s death.

Annuities differ from life insurance policies in a few key ways, such as when they're paid out and who they benefit

Annuities are intended to benefit the plan owner, and benefits are paid out during the owner's life. The person who buys life insurance rarely sees those benefits—they're intended instead for heirs and dependents.

If someone buys a $100K annuity, they may receive $525 to $1K monthly payments

In general, how much an annuity will pay out depends on a variety of factors, including how old an annuitant was when they bought it and what type of annuity they bought. Regardless, annuities can provide a guaranteed extra income for retirees.

Investments into an annuity are typically locked up during the accumulation period

For one year, most annuitants won’t be able to withdraw any funds. After that, most contracts allow them to take out up to 10% of their accumulated total annually before fees—called surrender charges—are applied to their withdrawals.

Life insurance policies and annuities are both contracts between individuals and insurance companies

But while life insurance policies are paid out only after an individual dies, annuities are intended to provide a steady income while the investor is still alive. Also, life insurance protects an investor's family in the event of their death, but an annuity helps protect an investor from outliving their retirement savings.

Use this annuity income calculator to estimate how much money someone can expect in their annuity payouts, depending on factors such as how much they invest and how long they expect to be paid.

Annuitants have to pay income taxes on the annuity payments they receive, unless their annuities are folded into a Roth IRA

In most other cases, annuities grow tax-deferred until annuitants start to receive payments. Those payments are then taxed as regular income. Nonqualified annuities, which are bought with after-tax dollars, have different rules.

Cash balance pension plans provide the option of a lifetime annuity

Specifically, these defined-benefit plans are retirement plans that differ from traditional pensions in that they can come in one lump sum rather than in monthly payments. These plans are most popular among small business owners and their employees. Learn more about them in this article.

Annuities have two core phases: the accumulation phase and the annuitization phase

During the accumulation phase, individuals invest in their annuity with financial contributions. The annuitization phase is when the annuity is paid out.

Annuities come in different types, such as immediate annuities and deferred annuities

Immediate annuities have no accumulation phase and go straight to the annuitization phase, whereas deferred annuities are set up to begin paying out at an agreed-upon date in the future. Annuities can also differ in how they accumulate value (fixed and variable annuities).

Annuities are regulated at the state level

However, certain types of annuities, like indexed annuities, are also nationally regulated by the SEC and the Financial Industry Regulatory Authority to protect investors.

Pension plans investing over 60% in stocks had the highest real returns in 2024

In order to ensure that retirees received all the retirement funds a company or other institution may have promised them, pensions were often limited to investing in run-of-the-mill assets like government securities, investment-grade bonds, and blue-chip stocks. But as market conditions have evolved, pensions are increasingly being invested in a wider range of assets, including alternative investments.

When a pension holder dies, payments are sometimes passed on to a relative

Those relatives are often the pension holder’s surviving spouses or dependents. This article offers tips from a financial expert on how to make sure your spouse is taken care of during retirement, including navigating a pension’s ultimate destination.

Lottery winners have two choices: lump sums or annuities

Lottery winners can receive either a lump sum or a yearly payout for 30 years. If they take the lump sum, they can receive only about 60% of the winnings—and that 60% is then taxed. If they choose to receive the annual payout as an annuity, there are tax strategies they can use to minimize how much they owe.

Should you give up a car in retirement?

Did you know that drivers over the age of 74 tend to pay higher car insurance rates than most other age groups? That small fortune in auto insurance payments is just one reason some people give up a car when they retire. If you're curious about the pros of getting rid of your car when you retire, read this article.

US pension plan adoption has declined from 1975 to 2021

Pension plans are a form of guaranteed retirement plan for long-time workers, and they were a major part of industries in the mid-20th century. With the rise of the 401(k) and similar tax-advantaged, defined-contribution accounts, these so-called defined-benefit plans have declined in use by employers. Compare US adoption of both kinds in this table.

About 30% of financial advisors opted for fixed and indexed annuities in 2023

An infographic that shows the most common types of investments used by financial advisors with their clients in 2023 also found that nine in 10 advisors used ETFs, and three-quarters invested in cash and cash equivalents.

Pensions often must ‘vest’ for an employee to be eligible for them

This means that often, an employee won’t be eligible to receive a full pension benefit from an employer until they have worked at the job for a certain number of years. Specifically, these vesting schedules determine when one owns their employer’s pension contributions. The number of years varies significantly by employer.

The prevalence of 401(k) plans and IRAs over pensions shifted investment risk from employers to employees.

Many countries, like Iceland and Norway, offer pensions to elderly citizens

Iceland, Luxembourg, and Norway offer some of the highest annual pension payouts at over 30,000 euros. The below chart shows how European nations stack up in terms of which offer the highest annual pension payouts.

Before Social Security, elderly Americans relied on family support, limited state pensions, or company-sponsored pensions

Before Social Security benefits were available to American retirees, they had to find other ways to get by. Pensions were only available to roughly 15% of workers, and most elderly Americans went without meaningful economic security.

Pension funds' allocations to risky, alternative investments increased by 25% between 2001 and 2021

The portion of pension funds' risky investments, including alternative investments such as private equity, increased from 14% in 2001 to 39% in 2021. Analysts say private equity investments have delivered higher returns than traditional assets like stocks and bonds. Increased investment in private equity has also given pensions a way to recover from the 2008 financial crisis without necessarily investing more money.

Expert says 90% of lottery winners take a lump sum vs. an annuity

However, a lawyer specializing in lotteries told CNBC that lottery winners should opt for an annuity instead. Lump sums are immediately slashed in half, and while both options are taxed, there are ways to minimize the taxes owed on annuity payouts.

Most pensions are subject to federal income taxes

Those taxes kick in once someone starts taking distributions from their pension. Whether a pension is subject to state income taxes depends on the state and other factors. Learn more about how pensions are taxed in this article.

Americans think they need $1.46M to retire comfortably in 2026

That's far less than what many Americans have saved. While the median retirement savings for those ages 65 to 74 is $200K, the mean is about $609K.

Americans are retiring later than they used to

A Gallup poll from 2022 found that the percentage of adults between the ages of 55 and 74 who are retired is declining.

8 key milestone ages in retirement

At age 50, you can make catch-up contributions to retirement accounts. At age 65, you become eligible for Medicare.

Read why Gen Z is saving more for retirement than older generations

Despite more and more Americans taking money from their retirement funds to cover expenses, many members of Gen Z are investing more in their retirement. Part of the reason for increased savings amongst this generation could be better-designed retirement plans.

Social Security beneficiaries have received cost-of-living adjustments almost every year since 1975

Until 1975, Congress had to act each time Social Security benefits were increased. The 1970s saw particularly high inflation rates that eroded the purchasing power benefits, leading to the change.

Life insurance offers peace of mind, ensuring that loved ones are financially supported after one's passing

People typically apply for life insurance policies through specific companies or online marketplaces. This video offers more information that's important to know when considering buying life insurance.

Some multibillion-dollar pension funds depend on hedge funds

Pensions are responsible for safeguarding the retirement plans of many corporate and government employees alike. Pensions differ from 401(k) plans and sometimes rely on alternative assets, like hedge funds, to insulate their portfolios of billions of dollars from volatility in financial markets. Read the case top pension advisor Cambridge Associates makes for hedge funds.