The Contract

• The person who purchases the annuity is the owner and most often the annuitant, though this is not required. Insurance companies offer life income guarantees with excess money paid to beneficiaries upon the death of the annuitant.
  
  

Tax Favorability

• An owner can place an unlimited amount of money into an annuity contract and have all earning grow tax-deferred, provided withdrawals are taken after age 59 1/2. Earnings are always withdrawn first and added to income.
  
  

Income

• Annuities can provide income to an individual either as a period-certain, lifetime-guaranteed or fixed-dollar disbursements.
  
  

Annuitization

• Annuitization occurs when the annuitant takes income to utilize the account beyond a systematic withdrawal. Annuitization cannot be stopped once started and either pays for the lifetime or for a specified period with the amount determined by insurance mortality tables.
  
  

Flexible Investments

• A person can select a fixed annuity, which offers a guaranteed rate of return, or a variable annuity, which invests in mutual fund sub-accounts selected by the owner. Many insurance companies have hybrid contracts that mix fixed and variable benefits.