[jIM_Ohio]

There is more than one kind of annuity.

Fixed, variable, immediate.

Immediate annuities are the best of any type in my opinion. Pretty much means you hand over a sum of money, and the company turns this into a stream of payments to you.

Might be you turn over $100k and get payments of $7500 per year (7.5% return) for life.

Variable annuities offer a tax shelter (like 401k) and other features. Very tough to compare company 1 to company 2 because more often than not the features will be different.

Premise with a variable annuity is you invest in mutual fund xyz inside of an annuity. If market goes up 7% you get 7%, market goes up 25% you get 9%, market goes up 5% you get 5% (cap of increase is 9%), market goes down 50% you get 2% (there is part of contract which has minimum increase). Then on a given date and with given terms you turn the variable annuity into an immediate annuity.

For example if you invested 6.25k, and over 30 years it reaches a value of 100k you have sheltered all the gains from taxes thus far. At the 30 year mark you annuitize the whole amount and get 7500 per year income (same 7.5% return as above).

There is a fixed annuity which allows you to invest that same 6.25k and always have it earn a fixed amount (inside the tax shelter). Will probably be a fixed amount around 3-5%. Meaming 6250 investment grows to 25k in about 30 years. You could then annuitize that 25k with same 7.5% return ($1875/year).

Annuities have phases, most investors would be best off investing on their own, then buying/purchasing an immediate annuity when they retire.

If you use an immediate annuity when you retire for a portion of your income stream, most retirement calculations become more favorable (allows you to retire earlier with less saved). This is because the type of risks you take with your money go down, and portfolio volatility goes way down.