Annuities are insurance products that provide long-term income through a stream of future payments. While investment annuities save money for retirement and beneficiaries, structured settlement annuities stem from personal-injury legal cases, wrongful-death claims or lottery payouts. When unexpected circumstances arise and require immediate funds, you can sell your annuity or structured settlement payments as a solution. Call now to get an estimate for how much your payments are worth.

What is the Purpose for Your Annuity?

Annuities are designed to protect your financial assets, ensuring you’re financially secure for life. There are many benefits to annuities, which is why people planning for retirement, those who win the lottery and recipients of personal injury structured settlements use annuities most frequently.

  • Long-term Security
  • Tax-sheltered Growth
  • Safe and Reliable Investment
  • Account for Longevity
  • Avoid Probate
  • Adjust to Inflation
  • Care for Beneficiaries
  • Structure Payments Around Planned Expenses
  • Maintain an Affordable Retirement Lifestyle

Retirement Annuity

Monthly and annual payments starting at a set allow allow you to supplement your social security and pension income.

Personal Injury Structured Settlement

If you choose to settle a personal injury case — such as a trip and fall claim or product defect claim — out of court, the settlement is structured based on a time frame that meets the financial and medical needs associated with the injury.

Lottery Annuity

Mega Millions, Powerball and other lotteries often give winners a choice of claiming money in a lump sum or a lottery annuity that pays out over a specified period of time.

What You Need to Know About Annuities

Investors wanting a guaranteed retirement paycheck often turn to annuities. The concept is simple. People pay an insurance company a premium and are provided with a stream of payments. The savings grow tax-free and come with little to no risk.

Unlike a 401(k) or IRA, there is no limit to the amount you may put into an annuity. Funds may not be withdrawn until you reach 59.5 years, or you will pay a penalty. If you need your money back sooner, most annuities have a surrender charge built in. This amount is designed to protect the insurance company’s profits and declines as the annuity gets older.

Insurers will work one-on-one with you to set up a schedule tailored to your individual needs. If you want income immediately, plan for payments to start in a matter of months. If you want income once retirement begins, you can initiate payments decades after purchasing.

Annuities gained popularity in the U.S. in the 1980s, but the history of annuities dates back to the Roman Empire. Annuities first came to America in 1759 by way of Pennsylvania, when church pastors used the concept for a retirement pool. The concepts was first marketed publically in 1912 by a Pennsylvania life insurance company.

Is an Annuity Right for Me?

Deciding to fund an annuity is a deeply personal situation. Talk with your spouse and other loved ones, as well as trusted financial advisors such as an accountant or attorney before making this decision. There are also some questions you may wish to consider:

  • What kind of annuity is right for me?
  • Have I made maximum contributions to other retirement plans?
  • Am I using a highly rated insurance company to buy my annuity?
  • What is the cost of the annuity? Are there any fees?
  • Will I need my money sooner than 59.5 years old?
  • Who do I want to leave my assets to?
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Becoming an Annuity Owner

Find an Annuity Company

Find an Annuity Company and Finalize Your Contract

Choose a Reputable Company to Issue Your Annuity

There are a variety of brokers, insurance companies and banks that issue annuities. Make sure you choose a reputable company by looking at ratings provided by Fitch, Standard & Poor’s, AM Best and Moody’s.

Buying an Annuity

Purchase Your Annuity

An annuity is purchased in one of two ways: as a lump sum or with premiums.

Lump Sum Payments

Lump Sum Payment

An example of this type of annuity is a single premium immediate annuity (SPIA). The annuity issuer would accept one large payment, then within a year start providing income.

Series of Premiums

Series of Premiums

An example of this type of annuity is a deferred annuity, where you contribute payments during a distribution phase and then wait for years to receive distributions.

Settlement Award

Receive an Annuity as a Settlement Award

Following a lawsuit for a car accident, product defect or workers’ compensation claim, a court will award an annuity which provides for the plaintiffs long-term financial needs.

Major Players in the Annuity Market

  • Insurance Company
  • Owner/Annuitant
  • Annuity Buyer
  • Beneficiary/Spouse

Insurance Company

These businesses are annuity issuers. They work with brokers, courts and individual buyers to create individually-tailored annuity contracts, providing consumers with savings and investment options. They accept premiums, invest some of the funds and over time provide annuitants with income through a series of payments.


Individuals or defendants pay premiums to insurance companies. The insurance company stores the money in tax-sheltered, interest-growing accounts. At a scheduled time, the owner of the account (which can be you or someone you assign to receive payments) gets cash in a lump sum or a stream of payments which, in some cases, lasts all the way through retirement.

Annuity Buyer

These companies purchase future payments from annuitants in exchange for advancing cash. They work as a middleman, navigating between annuitants who need money now and companies scheduled to make payments in the future. This arena for selling payments—made up of annuity owners and buyers—is known as the secondary market.


When the owner of an annuity dies, remaining payments often go to a beneficiary or are transferred to a spouse. Every annuity contract has different rules written into it for how many payments, if any, are passed on and who the payments will go to. Riders can also be purchased to increase the amount inherited. Designating a beneficiary helps to avoid a lengthy probate process.

Types of Annuities

Here are different types of annuities available today in the market. They vary in benefits, conditions, payouts and other factors. Here are some of the most common types of annuities:

Immediate (Single Premium)

The single premium annuity is purchased with a lump sum and guarantees income instantly. They allow investors to lock in a high interest rate. People approaching retirement are the largest segment of immediate annuity buyers.

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A lottery annuity is a structured settlement that disburses payment to its owner over a period of years, rather than paying the winning recipient a lump sum of money. This tool helps winners keep money for the long-term.

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Pensions pay the retiree a periodic, fixed amount based on salary and time of service with the employer before retirement. Defined benefit and defined contribution plans are popular examples of employer-offered pensions.

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A deferred annuity delays payments during the accumulation stage, where your assets grow tax-deferred, and distributes payments in the income phase as a lump-sum payout, periodic payments or through annuitization.

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Choosing When Payments Will Start

Deferred Annuities

Deferred Annuities will have an accumulation phase, where interest builds over time, then a distribution phase where the annuitant accepts a lump sum or a stream of payments. Choose a date for your payment to begin!

Immediate Annuities

Immediate Annuities begin payments within 12 months. These tend to be preferred by people closer to retirement. Find out when your next check will arrive!

Waiting While Payments Accumulate

Fixed Annuities

If you own a fixed annuity, the amount you will receive every month (or year, depending on the schedule) is predetermined and will not change. This limits growth but provides security.

Variable Annuities

If you own a variable annuity, your returns are tied to the market and how the annuity issuer invests your money. You have the chance to receive a bigger return, but you also take on risk.

Fixed vs Variable Annuities

Handling Unexpected Expenses

Withdrawal Option

If you face an emergency and have expenses you didn’t plan for, you can withdraw money from your annuity. As long as it is not more than your annuity contract specifies and is after the first five to seven years of owning the annuity, you shouldn’t be penalized for taking out money early.

Selling Payments

If you need to take out a larger sum for a crisis, you’re buying a bigger home for your growing family or you’re investing in a business, you can sell future payments to an annuity purchaser and get cash early. The purchaser will give you options for selling some or all or your payments.

Approaching the Golden Years

Retire Beach

Tax Benefits

While your principal grows, you are spared from paying taxes on the annuity. Also, unlike other investments, there is little risk involved and your money is protected.

Starting to Receive Payments

At a given date preset by your annuity contract, you will start receiving payments. This can allow you to put off Social Security payments until later, which will increase the size of your Social Security payments.

No More Tax Penalties

IRS early withdrawal penalty of 10% applies to withdrawals from retirement accounts.
However, once you reach age 59 ½, this penalty no longer applies.
Tax Penalties

Age 59 ½

Supplements Pensions and Social Security

Afford the Retirement Lifestyle You Desire

As time goes by you will have more access to your retirement savings. By combining pensions, Social Security, 401(k) savings, IRAs and annuities, you will be better able to pay for medical costs, living expenses and vacations to visit the grandkids.

Straight Life Annuities

For this type of annuity, an actuary will estimate the life expectancy of an annuitant. Payments will continue through annuitant’s entire lifespan, regardless of the payout exceeding interests and gains. However, if the annuitant passes away before the payout is reached, the remaining balance does not go to beneficiaries.

Retire Pig

Beneficiaries and Spouses

Depending on the rules dictated by your annuity contract, remaining payments may be passed on to a designated beneficiary or continue with monthly payments for a spouse.

Pros & Cons of Annuities

Annuities can be useful in the right circumstances. You should be aware of all their available benefits, as well as their risks and drawbacks.


  • Your money can grow tax-deferred.
  • Safe investments generally backed by established insurance companies.
  • Allows income for life, especially useful if you outlive your other available assets.
  • Guaranteed against loss by taking risk out of your hands and transferring it to insurance company.
  • Timed payments minimize taxes.
  • Death benefits allow your money to be quickly transferred to a loved one after you die.
  • Another way to contribute to retirement funding if you’ve maxed out contributions to a 401(k) or IRA.


  • Complex financial instruments with expensive fees, commissions and administrative charges.
  • Your money is locked in for a certain period of time.
  • Surrender charges and IRS penalties applied when withdrawing funds before age 59½.
  • Relinquish the lump-sum payment option when you buy an immediate annuity or annuitize your deferred annuity contract.
  • Taxes applied to annuity payments may be higher in the future than they are now.
  • Not insured by the FDIC or NCUA.
  • Capital gains on annuities are not tax-deferred and are subject to regular income tax.
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