An annuity is simply a contract with an insurance company which typically provides a wide choice of payout options, including a guaranteed income for life. Under a fixed annuity contract, the insurance company guarantees a rate of return. Under a variable annuity contract, the owner gets investment returns which may be higher or lower, and principal is not guaranteed.
More options mean more opportunities, but they also can mean more risk.
Keep in mind that with any investment there is a risk-reward relationship. The lower the risk, the lower the return. The higher the risk, the higher the potential return. But with higher risk investments comes a bigger chance that you might lose part of your investment. With that in mind, let's look at some of the choices you'll have for funding options.