Barbara Friedberg explains how annuities work:
- You purchase an annuity from an insurance company with either a single payment or ongoing contributions.
- The money in your annuity account grows at an interest rate or predetermined rate associated with a specific market rate.
- Upon retirement, the money in the annuity account is annuitized — converted into an income stream — or withdrawn in a lump sum.
There are two broad types of
annuities: immediate and deferred. Within each of these categories are fixed-
or variable-payment options. Read the details at:
