An annuity is a contract with an insurance company. The insurance company agrees to provide a stream of income to the individual in exchange for payment. The holder of the annuity cannot outlive the regular income from the investment which makes this attribute especially unique. Therefore, annuities are used as an asset to fund retirement. Another advantage is the investment gains accumulate and compound tax deferred.

Across the United States with the down turn in the stock market annuities have become a major part of the retirement and investment planning for many Americans. However, annuities are designed to be long-term investments, to meet retirement and other long term goals. Annuities are not suitable for meeting short-term goals because substantial taxes and insurance company charges may apply if you withdraw your money early.