Annuities with a guaranteed lifetime withdraw benefit work like Social Security or a pension. They can guarantee you a lifetime stream of income, subject to certain conditions and assuming no excess withdrawals are taken.

With a fixed indexed annuity, your money is not invested directly in the market. It’s linked to an index, so your account value will never be credited less than zero if that index decreases. Linking to an index provides the potential to earn interest, and your account value can grow if the index increases.

A majority of annuity contracts permit you to make a one-time withdrawal per year without being charged a withdrawal fee. This amount is typically limited to 10-15% of the current accumulated value of the investment. However, they comply with income tax laws for all withdrawals, including the free once-a-year withdrawal.

Another way that you can get money from your annuity is through what is called the systematic withdrawal plan. A systematic withdrawal plan is what allows you to receive a guaranteed flow of income every month, quarter, semi-annual, or annual basis.

The systematic withdrawal system differs from annuitization because it’s not a permanent decision. This system gives you the option to start or stop these payments whenever you desire. These payments give you flexibility without losing control of your money or the taxes that come with the transactions.

With systemic withdrawals, the earnings are taxed first, so your earnings have been exhausted, allowing the tax-free return on principal to remain.

As long as the account balance hasn't yet been used up, your full account value will be passed to your named beneficiaries. No surrender charges will be applied and your beneficiaries can usually avoid probate.

You are not required to pay the financial professional directly in order to buy an annuity. Your full premium is available to potentially earn interest from the annuity’s effective date. Annuity products are only offered through financial professionals and licensed insurance producers, who are compensated through commissions which are not deducted from the premium paid for the policy.

More and more 401(K) plans are adding annuities as options now that the 2019 SECURE Act has passed Congress. However, the annuity options that your 401(K) offers may not reflect the options in the commercial marketplace or may have a structure that doesn’t work for you. 401(K) plan managers often aren’t skilled at helping you select an annuity that’s right for you.

Shopping the market means you can spot the best rates rather than settling for one. Only once you learn more about your available policies can you make an informed decision about the best choice.