Are annuities investments?

An annuity is a contract between you and an insurance company to cover specific goals, such as principal protection, lifetime income, legacy planning or long-term care costs. Even though they may be marketed as investments, "annuities are not investments," Haithcock says. "They're transfer-of-risk contracts."

What is an annuity & how does it work?

At its most basic level, an annuity is a contract between you and an insurance company that shifts a portion of risk away from you and onto the company. There are 2 basic types of annuities: Income annuities can offer a payout for life or a set period of time in return for a lump-sum investment.

How do people invest in annuities?

People invest in or purchase annuities by making monthly premium payments or lump-sum payments. The holding institution issues a stream of payments for a specified period of time or for the remainder of the annuitant's life.