You know the old saying: Kill two birds with one stone?It’s just a saying …Annuities are like that… they’re tax-deferred retirement savings plans, but they’re also insurance policies. When you buy an annuity, you’re investing a certain amount of money with an insurance company. The insurer promises to credit earnings to your account and to annuitize your account value. Annuitization means that insurer will return your principal and earnings to you in regular payments - guaranteed - for the rest of your life. Or, if you prefer, you can withdraw your money as you need it.
Some investors use annuities as a way to accumulate tax-deferred earnings without planning to annuitize. Others buy annuities as a personal pension, to provide a stream of guaranteed lifetime income, and to have a good life insurance policy, to protect the family.