Basically, an annuity is a contract between you and an insurance company. You make premium payments to the company and, in return, the company makes a series of income payments to you at regular intervals. The amount of money you receive will depend on how much you contribute, any interest you earn, and how long you receive income payments. You choose the length of time to receive payments, whether for a set amount of years or to last your lifetime.

Annuities can be divided into two basic categories:

• Immediate — You start receiving income payments right away.
  
  
• Deferred — You receive income payments at a later, pre-determined date, which allows your money to earn interest and grow tax-advantaged over time.

Deferred annuities should be considered a long-term savings plan. You should decide if you have the funds to set aside for a number of years. Although you may be able to access some of those funds sooner, it can be to your advantage to let them grow. In some cases, early withdrawals may result in penalty taxes and fees.

Both types of annuities can include a death benefit, which can be passed on to your beneficiaries. The amount of money can vary depending on the type of annuity you choose.

When deciding on an annuity, be sure to work with a licensed professional who understands annuities and the options open to you.

Additional Information
It’s always a good idea to learn as much as you can before making any decision. Remember, a licensed professional can be a great resource. Also talk to friends and family for their input.

For additional information, please visit our Senior Resource Center.

Make sure to check out other important insurance topics, including:

• Coverage Types
• Tips for Choosing Coverage
• Industry Information
• Glossary of Common Insurance Terms

This educational content is provided courtesy of Physicians Mutual^®.