Common Questions

An annuity is a contract between you and an insurance company. You deposit a sum of money — either all at once or over time — and the company promises to grow that money and, when you're ready, pay it back to you as a guaranteed income stream. Annuities are primarily used to create predictable retirement income and protect savings from market volatility.

With fixed and fixed indexed annuities, your principal is fully protected from market losses. The insurance company guarantees you will never receive less than you put in. However, early withdrawals may be subject to surrender charges during the surrender period (typically 5–10 years) and a 10% IRS penalty if you withdraw before age 59½.

A fixed annuity pays a set, guaranteed interest rate for a specific term — simple, predictable, and easy to understand. A fixed indexed annuity (FIA) credits interest based on the performance of a market index like the S&P 500, but with a 0% floor so you cannot lose money in a down year. FIAs offer more growth potential than fixed annuities while still protecting your principal.

An immediate annuity (SPIA — Single Premium Immediate Annuity) converts a lump sum into a guaranteed income stream that begins within 30 days. Think of it as purchasing your own personal pension. You can choose income for a set period of years, for your lifetime, or for you and a spouse's joint lifetime. Once you annuitize, the payment is guaranteed regardless of how long you live.

An FPDA lets you make ongoing contributions on your own schedule rather than requiring a single lump sum. You can contribute monthly, annually, or whenever funds are available. Your balance grows tax-deferred during the accumulation phase, and you choose when to begin drawing income. This makes FPDAs one of the most flexible annuity accumulation strategies available.

Annuities grow tax-deferred — you pay no taxes on gains while they accumulate inside the contract. When you take distributions, the earnings portion is taxed as ordinary income. If you purchased the annuity with after-tax dollars (a non-qualified annuity), each payment is treated as a mix of tax-free return of principal and taxable earnings. Withdrawals before age 59½ are also subject to a 10% IRS early withdrawal penalty.

Most annuities include a death benefit that passes any remaining contract value to your named beneficiaries outside of probate — avoiding the time and cost of the estate settlement process. The specific benefit depends on the type of annuity and your payment options. For immediate annuities with lifetime income, a "period certain" option can guarantee a minimum number of payments to your beneficiaries if you die early.

Annuities are backed by the financial strength of the issuing insurance company and are protected by state guaranty associations — typically up to $250,000 per company, per policyholder. Quote-Bot only works with financially stable, A-rated carriers. It's also prudent to spread large annuity balances across multiple insurers to maximize guaranty association protection.

A surrender charge is a fee applied if you withdraw more than your free withdrawal amount (usually 10% per year) during the surrender period. Surrender periods typically last 5–10 years and the charge decreases each year until it reaches zero. After the surrender period, you can access your full contract value without penalty. Annuities are designed as long-term instruments and are best suited for money you won't need immediate access to.

Yes. With Quote-Bot you can explore annuity options, compare rates, and get a quote entirely on your own — or connect with a licensed annuity specialist at any point. Given the long-term nature of annuities and the variety of product types, many clients appreciate having a specialist available to discuss their specific situation. The choice is always yours.