Deferred annuities are the most commonly purchased type. A fixed annuity gives you a guaranteed interest rate during the time you're making contributions. This interest rate can be adjusted every six months or year depending on prevailing rates. A variable annuity allows you to invest your contributions different ways. You can create sub-accounts within the annuity to diversify your options, if you choose.
Distribution usually begins one month after transfer.
In case the index has a down year, however, you are guaranteed a certain low-end return no matter what. Because of this, annuities may be a poor choice for retirement planning if you have other options available. But if you've maxed out your contributions to your retirement plans and know that you'll need to save even more, you may choose to purchase an annuity. If you do decide that an annuity is right for your situation, be sure to compare choices from a few different companies. Management expenses, other fees and investment options can vary greatly, and will affect the return on your investment.