What Is an Annuity?
An annuity is a contract between you and an insurance company. You make a lump-sum payment or series of payments, and in return, the insurance company provides regular disbursements beginning either immediately or at some point in the future. Annuities are primarily used to create guaranteed retirement income — money that arrives like a paycheck for the rest of your life, regardless of how the stock market performs.
In a world where traditional pensions have largely disappeared and Social Security may not cover all your needs, annuities have become one of the most powerful tools for retirement income planning.
"An annuity is the only financial product that can guarantee you will never run out of money in retirement — no matter how long you live. That guarantee has real, measurable value."
Types of Annuities
- Fixed Annuity — earns a guaranteed interest rate set by the carrier. Predictable, safe, no market risk. Ideal for conservative savers. Similar to a CD but often with higher rates and tax-deferred growth.
- Fixed Indexed Annuity (FIA) — most popular type. Growth linked to a stock market index (like the S&P 500) with a floor (you never lose money due to market downturns) and a participation rate or cap. Offers market-linked upside with principal protection.
- Variable Annuity — invested in sub-accounts similar to mutual funds. Highest growth potential but also market risk. Usually comes with optional riders for guaranteed income.
- Immediate Annuity (SPIA) — you pay a lump sum and begin receiving monthly income immediately. Ideal for retirees who need income now.
- Deferred Income Annuity (DIA) — fund it now, receive guaranteed income starting at a future date (e.g., age 75 or 80). Very high income amounts for the premium paid.
Key Benefits of Annuities
- Guaranteed income for life — you literally cannot outlive the payments
- Tax-deferred growth — no taxes on earnings until you withdraw
- Principal protection — fixed and indexed annuities protect your original investment
- No contribution limits — unlike IRAs and 401(k)s, there's no annual cap on what you can put in
- Death benefit — many annuities guarantee your heirs receive at least what you contributed
- Inflation protection riders available to increase income over time
- Avoid probate — annuity proceeds pass directly to named beneficiaries
Who Should Consider an Annuity?
- Anyone within 5–15 years of retirement who wants to guarantee a portion of income
- Retirees who are concerned about outliving their savings
- High earners who have maxed out 401(k) and IRA contributions and want more tax-deferred savings
- Anyone who has received a lump sum (inheritance, settlement, retirement payout) and wants to convert it to lifetime income
- People who want predictable income to cover essential living expenses in retirement
Annuity Considerations and Questions to Ask
- What surrender period and charges apply if I need to access funds early?
- What is the carrier's financial strength rating? (Omaha Life Group works only with A-rated carriers)
- What riders are available — income riders, death benefit riders, long-term care riders?
- How does the income payment amount compare across carriers for my deposit amount?
- Does the income adjust for inflation?
Omaha Life Group is an independent annuity broker, which means we have no loyalty to any single carrier. We compare products from dozens of carriers to find the annuity that generates the most income or growth for your specific situation and goals.