Annuities: What Do You Want Your Retirement Money to Do?
Annuities can create guaranteed income, protect principal, provide a guaranteed interest rate, offer index-linked growth potential, or help protect against outliving your savings. Start with the outcome you want. Then compare the type of annuity designed to do that job—and understand what you give up in exchange for the guarantee.
- Start with your goal
- Compare multiple insurers
- Understand the trade-offs
Start with the outcome you want
You do not need to know annuity terminology before you begin. Choose what you want this part of your retirement money to accomplish, then look at the contracts designed for that purpose.
Create lifetime income soon
A Single Premium Immediate Annuity can exchange a lump sum for contractual income that begins shortly after purchase.
Explore SPIAs → Protect & accumulateLock in a guaranteed rate
A fixed deferred annuity can provide a stated interest guarantee for a period while allowing interest to compound tax-deferred.
Explore fixed annuities → Protection + growth potentialKeep some growth potential without direct index losses
A fixed indexed annuity protects the contract from a negative index return while giving you an opportunity to earn interest when the referenced index rises. You do not receive the full market return.
Explore fixed indexed annuities → Income laterBuild a late-retirement income floor
A deferred income or longevity annuity is designed to begin contractual income at a future age rather than immediately.
Explore longevity annuities →You do not have to keep researching before you talk to someone.
Tell us whether you want income, principal protection, guaranteed interest, growth potential, or future income. We can help you compare annuity options around those priorities.
Test the trade-offs with your own numbers
If you are not ready to talk with an agent, use the decision tools to see how income, liquidity, survivor protection, and other trade-offs may look using your own assumptions.
SPIA Income Estimator
Estimate how much lifetime income a lump sum may create and compare payout structures, beneficiary guarantees, and possible tax treatment.
Use the SPIA estimator → CouplesJoint & Survivor Annuity Calculator
Measure how much initial income is surrendered to protect a second life, then compare that cost with separately underwritten life insurance.
Run the joint-survivor comparison → Liquidity vs. longevitySPIA vs. CD Crossover Calculator
Compare keeping a lump sum liquid and drawing from it with exchanging that money for guaranteed lifetime income.
Compare the two jobs →You only need to separate two questions
First ask when you want income to begin. Then ask how you want the contract to earn or change in value before that point. Annuity names often combine answers to both questions.
Example: a fixed indexed annuity is still a type of fixed annuity. “Indexed” describes the interest-crediting method; it does not mean the contract directly owns the index.
Which type of annuity is built for the job you have in mind?
Once you know the outcome you want, these pages show what each type can do for you, what it cannot do, how access to your money works, and what you should compare before buying.
Single Premium Immediate Annuities (SPIAs)
Designed to turn a lump sum into contractual income, including lifetime-income options.
Learn about SPIAs →Fixed Deferred Annuities
Designed for tax-deferred accumulation with interest guarantees and later withdrawal or income options.
Learn about fixed deferred annuities →Fixed Indexed Annuities
Fixed contracts that use index-based formulas to determine some interest credits, with caps, participation rates, spreads, or other contract rules.
Learn about indexed annuities →Longevity Annuities
Deferred income contracts intended to create larger contractual income beginning later in retirement.
Learn about longevity annuities →Period Certain Annuities
Income structured for a defined number of years rather than for an uncertain lifetime.
Learn about period certain income →Variable Annuities
Market-based annuity contracts using investment subaccounts, often with optional insurance guarantees and additional costs.
Learn how variable annuities work →What do you give up to get the guarantee?
An annuity can solve a real problem, but every guarantee comes with a trade-off. Before you buy, understand what becomes more certain—and what becomes less flexible.
A life-only income annuity is not a savings account with a high interest rate
With a straight-life SPIA, the premium is generally exchanged for a lifetime-income promise. The payout can include interest, return of premium, and mortality credits from pooling longevity risk. That is why comparing the payout percentage directly with a CD rate can be misleading.
A CD is built to preserve principal and liquidity. A life-only SPIA is built to transfer longevity risk. Neither feature set is automatically better; they solve different problems.
See the SPIA vs. CD comparison →Keep control of the account
Transfer longevity risk
What can reduce what you actually receive?
Some annuity costs appear as fees. Others show up through limits on interest, withdrawal restrictions, surrender charges, or contract terms. The important question is what affects your money.
How long is the rate guaranteed—and how long is my money committed?
With a fixed deferred annuity, compare the guaranteed rate period with the surrender period, how much you can withdraw without a surrender charge, and whether a market value adjustment can apply.
How much of the index gain do I actually receive?
With a fixed indexed annuity, caps, participation rates, spreads, and the crediting method determine how much interest reaches your contract. The index itself is not your return.
What am I paying for?
Variable annuities may include contract expenses, underlying investment expenses, surrender charges, and optional rider charges. The selected subaccounts can also rise or fall in value.
Can you answer these six questions about the contract?
If the answer to any of these is unclear, keep asking questions before you move your money. A sales illustration, bonus, or payout percentage is not enough by itself.
- What specific risk am I asking this annuity to transfer?
- How much of my money will remain accessible?
- Which values are guaranteed, and which can change?
- What happens if I surrender or withdraw early?
- What happens to the contract when I die?
- What non-annuity alternative should I compare it with?
Does an annuity give me extra tax deferral?
An annuity held inside a traditional IRA or other qualified retirement account does not create a second layer of tax deferral. Distributions generally follow the tax rules that already apply to that retirement account.
When do I pay tax on the growth?
After-tax basis and earnings can receive different tax treatment. Withdrawals and annuitized payments are also taxed differently. For applicable annuitized payments under the IRS General Rule, the tax-free portion is based on the owner’s investment in the contract relative to expected return.
Tax treatment depends on the contract, funding source, ownership, distribution method, age, and other facts. This page is educational and is not tax advice.
What happens if you ask us to compare annuities?
You do not need to arrive knowing the product name. Tell us what you want this money to do and what matters most to you. We can then compare annuity options designed for that job.
Tell us what you want
Income now, principal protection, guaranteed interest, growth potential, future income, survivor protection, or another specific goal.
See options built for that job
We narrow the comparison to contracts designed to accomplish the outcome you actually want.
Compare what affects your money
Review guarantees, income, access, crediting terms, surrender provisions, riders, insurer strength, and what can change later.
Decide with the trade-offs clear
Before moving forward, know what stays liquid, what is guaranteed, what happens at death, and what alternative deserves comparison.
Your goal is the starting point. Decision Tree Insurance can then compare available annuity contracts from insurance companies we represent in your state.
Go deeper on the decision that matters to you
You do not need to learn everything about annuities. Use these articles when a particular question matters to the decision you are making.
SPIA vs. CD: Two Different Jobs, Not Two Rates
See why liquidity and longevity protection should not be compared using the headline rate alone.
Read the comparison → UnderwritingMedically Underwritten SPIAs
Learn how certain serious health conditions can change the pricing of lifetime income for qualifying buyers.
Read the guide → Spouse protectionJoint Survivor SPIA vs. Separate Life Insurance
Compare built-in survivor income with a higher single-life payout paired with separately underwritten protection.
Read the strategy →Common annuity questions
What is the main purpose of an annuity?
An annuity is an insurance contract used to transfer one or more financial risks to an insurer. Depending on the contract, the job may be lifetime income, principal protection, tax-deferred accumulation, delayed income, or a combination of guarantees. Start with the job before selecting the product type.
What is the difference between an immediate annuity and a deferred annuity?
An immediate annuity is purchased to begin income relatively soon, generally within one year. A deferred annuity has an accumulation or deferral period before income begins or the owner starts taking distributions. “Immediate” and “deferred” describe timing, not whether the annuity is fixed, indexed, or variable.
What is the difference between a fixed annuity and a fixed indexed annuity?
A traditional fixed annuity credits interest according to rates declared or guaranteed by the insurer under the contract. A fixed indexed annuity is also a fixed annuity, but some interest credits are calculated using a formula tied to an external index. Caps, participation rates, spreads, and other provisions can limit or change the credited result.
Can I lose money in an annuity?
It depends on the annuity and how it is used. Variable annuity subaccounts can decline with the market. Fixed annuities can also produce losses or reduced proceeds if withdrawals trigger surrender charges or market value adjustments, and all insurer guarantees depend on the issuing company’s claims-paying ability. Read the actual contract before relying on a guarantee.
How much of my savings should I put into an annuity?
There is no universal percentage. The amount should depend on the job the annuity is intended to perform and how much liquidity, emergency savings, growth assets, and other guaranteed income you will retain outside the contract. An irrevocable income annuity should not consume money you may need to access later.
What happens to an annuity when I die?
The answer depends on the contract and payout option. A straight-life income annuity can stop at death, while cash-refund, installment-refund, period-certain, joint-survivor, and deferred-annuity death-benefit provisions can create different results for beneficiaries. This is one of the most important provisions to review before purchase.
Are annuity payments taxable?
Often, but the amount and timing depend on how the annuity was funded and how money is distributed. Qualified retirement money generally follows the tax rules of the retirement account. With after-tax nonqualified money, basis and earnings can receive different treatment, and withdrawals are taxed differently from annuitized payments. Consult a qualified tax professional for your facts.
Do I need to know which type of annuity I want before I contact Decision Tree Insurance?
No. You can start by telling us what you want the money to accomplish, how much access you may need, and what worries you most about retirement. From there, we can help identify which annuity categories are worth comparing and which may not fit the job.
Why should I compare annuities from more than one insurance company?
Different insurers can offer different rates, income quotes, surrender terms, crediting methods, riders, and contract guarantees for the same general type of annuity. Comparing more than one company helps you focus on which contract best fits what you want your money to do rather than assuming one insurer’s product is automatically the best choice.
Find an annuity that fits what you want your money to do.
Tell us whether income, principal protection, guaranteed interest, growth potential, future income, or access to your money matters most. We can help compare available contracts around those priorities—and explain what you give up in exchange for each guarantee.
Educational information only. This page is not a recommendation, insurer quote, tax opinion, legal opinion, or guarantee of suitability or available rates. Product features, state availability, surrender provisions, tax treatment, and insurer requirements vary. Guarantees depend on the claims-paying ability of the issuing insurance company.