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What’s an annuity?
An annuity is a financial plan that pays you a steady income in retirement. It helps make sure you don’t run out of money as you get older.
Think of it as creating your own pension. You pay a premium into a contract. In return, you get a steady payout to help pay your bills in retirement.
There are 2 main types of annuities — deferred and immediate. Learn which one might be best for your situation.
What is an annuity?
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There’s a lot to consider when it comes to retirement planning. You might ask questions like: How can I protect my hard-earned retirement savings from market fluctuations? How can I cover basic expenses without a regular paycheck? Will I run out of money if I live a long time? If you’re looking for some peace of mind in retirement, an annuity could be a great option.
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So, what’s an annuity? It’s an insurance product that helps protect you against the risk of outliving your money. Here’s how it works. When you buy an annuity, you enter a contract with an insurer. You give them money, in exchange, they promise to give the money back to you plus interest at a later date or in the form of a reliable income stream.
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Annuities come in two main forms: deferred and immediate.
Deferred annuities are great long-term savings options. They allow you to grow money tax-deferred with the option to turn into income later. Your money will either grow at a fixed rate or a market-based rate, depending on the annuity you choose. When it comes time to retire, you can take the money out in a lump sum or start receiving scheduled payouts.
Immediate annuities, sometimes called income annuities, work best if you’re close to retirement. They let you quickly turn some of your savings into a reliable income stream. When you buy an immediate annuity, you open with a lump sum and start receiving payouts shortly after. You can choose to get guaranteed payouts for the rest of your life, a set number of years or both. You can also add beneficiaries to your contract. That way, you can rest easy knowing your family will be taken care of.
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Ready to find out if an annuity is the right or you? Schedule a call with one of our Retirement Income Specialists.
Description of visual information: [An annuity is a long-term insurance contract issued by an insurance company designed to provide a retirement income stream for life. Once the contract principal is converted into an income stream, you will no longer have access to your principal as a lump sum. Terms, conditions, limitations and surrender charges may apply.
Guarantees apply to certain insurance and annuity products and are subject to product terms, exclusions and limitations and the insurer's claims-paying ability and financial strength.
Money not previously taxed is taxed as income when paid. Withdrawals before age 59½ may be subject to a 10% federal tax penalty.
Learn about USAA's use of Artificial Intelligence at usaa.com/ai.
Life insurance and annuities provided by USAA Life Insurance Company, San Antonio, TX and in New York by USAA Life Insurance Company of New York, Highland Falls, NY. All insurance products are subject to state availability, issue limitations and contractual terms and conditions. Each company has sole financial responsibility for its own products.
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Fixed Indexed (FIA) Offers more opportunity for protected growth than a traditional fixed annuity based on the performance of the S&P 500® stock market index |
Fixed Guaranteed Growth (FGG) Offers protected growth at a guaranteed interest rate for a period you choose |
Single Premium Immediate Income (SPIA) Offers a guaranteed stream of income for your lifetime, a set number of years or both |
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Type of annuity Deferred |
Type of annuity Deferred |
Type of annuity Immediate |
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Minimum to open $100,000 |
Minimum to open $20,000 to $50,000 |
Minimum to open $20,000 |
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Term 7 years |
Term 3, 5 or 10 years |
Term 10 to 30 years, your lifetime or both |
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Goal Growing retirement savings based on the performance of the S&P 500® stock market index |
Goal Growing retirement savings based on a guaranteed rate |
Goal Creating guaranteed monthly income |
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Consider if You want growth based on the performance of the S&P 500® stock market index |
Consider if You want protected growth with a set interest rate, even prior to retirement |
Consider if You want a predictable income stream for a set time in your retirement |
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Our Retirement Income Specialists will talk with you about your goals and how an annuity could work for you.
They can help with claiming strategies, account reviews and more in a complimentary retirement review.
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How do annuities work?
Steps to complete How do annuities work?
Annuities FAQ
An immediate, or income, annuity pays out between 30 days and 12 months of opening it.
Yes. After owning your deferred annuity for one year, you can use it to generate income.
People living in retirement often use a SPIA to generate guaranteed income to cover their essential monthly expenses. This fixed monthly payment can help you meet your monthly bills and avoid the risk of running out of money during your retirement.
If you choose a guaranteed period option and pass before the period ends, payments will continue to your beneficiary.
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