Annuities
An annuity is a trade. Understand both sides before you make it.
You hand an insurance company a sum of money. In exchange it promises income — sometimes now, sometimes later, sometimes for as long as you live. Whether that is a good trade depends entirely on which type you buy and what you give up to get it.
In plain language
What this actually is
An annuity is a contract with an insurance company, not a bank account and not a market account. You pay in, and the company agrees to pay out under terms fixed in the contract.
People buy them for longevity. Social Security and a pension pay for life; savings do not. An annuity is one of the few ways to turn a lump sum into income that cannot run out.
People regret them over liquidity. Most annuities carry a surrender schedule — a period during which taking out more than a set amount triggers a charge. That schedule is the most important term in the contract, and the one most often glossed over.
Suitability
Who an annuity tends to suit
- People who have saved well but have no pension and want a paycheque that does not depend on the market
- Those who want to protect a portion of savings from market losses and are willing to trade some growth for it
- Anyone worried about outliving their money who values guaranteed lifetime income
- People who will not need the committed money for everyday liquidity during the surrender period
Eligibility
What to understand before you sign
There is no enrollment window for annuities — you can set one up any time. The gating question is suitability, not timing.
- The surrender schedule and how long your money is committed
- Whether the income is guaranteed for life or for a set period
- How fees, riders and any market participation actually work
- The claims-paying strength of the issuing insurance company
The honest picture
What it does well, and where it falls short
Both columns matter. A product described only by its advantages has been sold to you, not explained.
What it does well
- Income you can't outlive
- The right annuity can guarantee lifetime income, filling the gap between Social Security and what savings alone provide.
- Protection from market loss
- Fixed and fixed-indexed types protect principal from market downturns in exchange for capped upside.
- Tax-deferred growth
- Money inside an annuity grows tax-deferred until you withdraw it, which can suit long horizons.
Limitations worth knowing
- Surrender charges
- Access more than the allowed amount during the surrender period and you pay a charge — the single most important term to understand.
- Capped growth
- The protection comes at a price: fixed and indexed annuities limit how much you gain when markets rise.
- Complexity and fees
- Riders and features add cost and complexity, and not every feature is worth what it charges.
Comparison
The main types, in plain terms
They trade growth, protection and liquidity differently. The right one depends on what you actually need the money to do.
| Type | How it works | Who it suits |
|---|---|---|
| Fixed | A set interest rate for a set term, principal protected. | People who want a predictable, low-risk return with no market exposure. |
| Fixed indexed | Growth tied to a market index with a floor of zero and a capped upside. | People who want some market-linked growth without downside risk. |
| Immediate income | You convert a lump sum into guaranteed income that starts right away. | People at or in retirement who need a paycheque now, for life or a set term. |
How we work through it
The order we do things in
-
Name the job
We start with what the money is for — income now, income later, or protection — before discussing any product.
-
Check liquidity first
We make sure you keep enough accessible savings outside any annuity before committing a dollar.
-
Compare in writing
We lay out the surrender schedule, guarantees and fees side by side, in plain language.
-
Only if it fits
If an annuity does not clearly solve your problem, we say so — 'do nothing' is a legitimate outcome.
Where we help
Available across all seven states we serve
Annuities guidance is available to clients in every state we are licensed in. Our home base is northeast Wisconsin — the Fox Valley, Green Bay and the Lakeshore — and we work remote-first, by phone and video, right across every state on the list.
Questions
Annuities questions
Can I lose money in an annuity?
Fixed and fixed-indexed annuities protect your principal from market losses. Variable annuities can lose value. The type matters enormously, which is why we start there.
What is a surrender charge?
It's a fee for withdrawing more than the allowed amount during the surrender period — often several years. It is the most important term in the contract and we cover it first, not last.
Are annuities a good idea?
For the right person solving the right problem, yes. For someone who needs liquidity or already has enough guaranteed income, often no. The honest answer depends on your situation.
Related
Usually considered alongside this
Annuity guarantees are subject to the claims-paying ability of the issuing insurance company. Annuities are long-term contracts with surrender charges and potential tax consequences. This is general education, not tax, legal or investment advice; product features and availability vary by state and carrier.
Let's find out whether an annuity solves your problem
A no-fee conversation that starts with what you need the money to do — and an honest answer, including 'you don't need one.'