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How do annuities work for retirement?

Quick answer

An annuity is a contract with an insurance company where you exchange a lump sum (or series of payments) for guaranteed income, either immediately or starting at a future date. The insurance company pools your money with other annuitants and uses actuarial math to guarantee payments for your lifetime.

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When an annuity actually fits

A floor, not a fortress.

Used right, an annuity is the income floor your retirement budget rests on. Used wrong, it's a high-fee box your money is locked inside. We model both before recommending either.

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