What are annuities?

Annuities are insurance contracts that make regular payments to you either immediately or at some point in the future. You can purchase an annuity to help grow or protect your retirement savings or to provide you with guaranteed income.


Annuities come in a variety of forms. Each type can have unique features that may help you achieve your financial goals whether you're saving for retirement, approaching retirement, or living in retirement.

How tax-deferred annuities may help you save for retirement

If you are already saving as much as you can in your 401(k) or IRA,1 you can use this type of annuity to boost your retirement savings. Like any tax-deferred investment, earnings compound over time, providing growth opportunities that taxable accounts lack. Deferred annuities have no IRS contribution limits,2 so you can invest as much as you want for retirement. You can also use your savings to create a guaranteed stream of income. Depending on how annuities are funded, they may not have required minimum distributions (RMDs).

Withdrawals of taxable amounts from an annuity are subject to ordinary income tax. If you make withdrawals before age 59½, you may be subject to a 10% IRS penalty. Annuities also come with annual charges not found in mutual funds, which will affect your returns.

Deferred variable annuities

Deferred variable annuities include funds that may have the potential for investment growth. However, this can involve some market risk and could result in losses if the value of the underlying investments falls. Variable annuities are usually appropriate for those with longer time horizons or those who are able to handle market fluctuations. Some variable annuities allow you to protect your investment against loss, while still participating in potential market growth.

Deferred variable annuity with a guaranteed minimum accumulation benefit

A deferred variable annuity with a guaranteed minimum accumulation benefit (GMAB) provides you the potential to benefit from any market gains while simultaneously protecting your original investment from any market downturns for a specific period of time. This protection comes in the form of a rider on the variable annuity contract which guarantees that if your account value at the end of at minimum a 10-year holding period is less than the amount you had initially invested, the issuing company will add an amount that covers any losses to restore the full amount (less the impact of withdrawals and partial annuitizations). Also, if your situation changes, the account value is accessible as needed (surrender charges may apply3 and guaranteed amount will be reduced).4

Deferred fixed annuities

Deferred fixed annuities offer a guaranteed rate of return for a specific number of years. Fixed deferred annuities may be more suitable for conservative investors or for those interested in protecting assets from market volatility. In this way, they're similar to certificates of deposit (CDs).


However, deferred fixed annuities differ from CDs in that:

  • Annuities are not FDIC-insured
  • If you make withdrawals before age 59½, you may be subject to a 10% IRS penalty
  • Deferred fixed annuities may offer more access to assets than a CD
  • Annuity earnings compound on a tax-deferred basis

How deferred annuities may help as you approach retirement

Some deferred annuities may be appropriate for investors who are 5 to 10 years away from retirement because they may offer guaranteed income for life or for a set period of time. Because they provide reliable, guaranteed income, these annuities may enable investors who hold them to take a more aggressive approach with other assets in their portfolios.


Keep in mind access to the assets varies depending on the type of annuity you select.

Deferred fixed annuity with a guaranteed lifetime withdrawal benefit

A deferred fixed annuity with a guaranteed lifetime withdrawal benefit (GLWB) provides guaranteed lifetime income with the flexibility to choose when you start receiving income. With this type of annuity, the future income amount is guaranteed to increase on each contract anniversary for a set period of time or until the first lifetime withdrawal, whichever comes first. That means you will know how much income you (or you and your spouse if you have a joint contract) will receive each year at the age at which you decide to start your income payments.5 Also, if your situation changes, you can access your contract's accumulation value.6 (Surrender charges and market value adjustment (MVA) may apply.)

Deferred income annuities7

Deferred income annuities are fixed income annuities that begin making lifetime income payments or payments for a set period of time starting in the future following what is known as a deferral period. Because of the deferral period, you may receive a higher income payment than you would from a comparable immediate fixed income annuity with an equal initial investment. A cost of living increase is available to help keep pace with inflation.

How income annuities provide income while living in retirement

Income annuities may be appropriate for investors within one year of retirement because they offer guaranteed income for life or a set period of time. Because they provide reliable, guaranteed income, these annuities may enable investors who hold them to take a more aggressive approach with other assets in their portfolios.

Keep in mind that you may have limited or no access to the assets invested in immediate income annuities.

Immediate fixed income annuities

Immediate fixed income annuities offer a guaranteed, predictable payment for life, or for a certain period of time. Your guaranteed income payment cannot be affected by market volatility, helping shield your retirement income from market risk.

A cost-of-living increase is available to help keep pace with inflation.

More about annuities

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Whatever your financial and life goals, we can help with tax-deferred savings1 for your retirement, asset protection, or income generation.


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