How Does An Annuity Work?

As you may know that annuities could be regarded as insurance contracts that guarantee to pay you regular income either immediately or in the future. To start simple, generally, you can buy an annuity in two ways one with a lump sum or a series of payments. After which, you’ll receive income or it could be referred to as premium regularly for some period of time or lifetime. Although the income you receive from an annuity is taxed at regular income tax rates and not capital gains rates, which are usually lower. You also need to select a fixed, variable or indexed rate of return
You must note that investing involves risk like any other investment. The guarantees and protections are subject to the claims paying ability of the issuing company, but the guarantees do not apply to any variable accounts which involve investment risk and possible loss of principal.