Now, let's discuss another potential retirement option. Annuities are insurance and investment products that help you save, protect what you've saved or produce a steady stream of income.
There are two basic types:
Think of the deferred annuity as the "retirement annuity." It offers a good way to boost retirement savings once you've made the maximum allowable contributions to an IRA or a 401(k). There are no taxes until the funds are withdrawn. Deferred annuities can be either fixed or variable.
Immediate annuities are good for investors at or nearing retirement age because they offer guaranteed income for life or a set period of time. The idea behind an immediate (or "income") annuity is pretty simple: you pay a lump sum of money and the annuity pays you every month for as long as you live. Immediate annuities can be either fixed or variable.