How Can Annuities Be Used For Retirement? 
Annuities are used for retirement as a source of regular income . Your annuity is tax deferred until you take out payments . The contributions you put into an annuity are not taxed , and the earnings are taxed at your tax rate during retirement . Therefore , they can be a tax favorable way of earning supplemental income during retirement . If you take out an immediate annuity , you contribute a lump sum and can begin to take out regular payments nearly immediately . A deferred annuity allows you to make payments into it over a number of years , then annuitize the annuity to receive regular payments . These payments are generally used to add to Social Security benefits and other income during retirement . Variable annuities make your annuity more of an investment , with the risks that come with variable products . Indexed annuities also allow for more growth but protect the original contribution . 