Annuities 101: A Beginner's Guide to Guaranteed Income
Published March 4, 2026
Annuities have a reputation for being complicated, but the core idea is simple: you contribute money now, and an insurance company guarantees you income later — often for as long as you live. Here's what actually matters before you consider one.
What an annuity actually is
An annuity is a contract, not an investment in the traditional sense. You fund it with a lump sum or over time, and in exchange, the insurance company commits to paying you an income stream on a schedule you agree to, regardless of how long you end up needing it.
The main types, in plain language
Fixed annuities pay a guaranteed, predictable rate- Indexed annuities link growth to a market index, with downside protection built in
- Immediate annuities start paying out right away, useful near or in retirement
Who annuities tend to make sense for
Annuities aren't for everyone, and they aren't meant to replace your entire retirement strategy. They tend to make the most sense for people who want a guaranteed income floor to complement Social Security and savings — particularly if outliving your money is a real concern.
The bottom line
The right fit depends on your other income sources, your timeline, and how much guaranteed income actually makes sense to add. That's a conversation worth having before, not after, signing anything.