Annuities are financial products designed to help you grow your money and create reliable income — especially during retirement. If you're considering an annuity but have questions, this guide answers some of the most common ones.

An annuity is a contract between you and an insurance company. In exchange for a lump sum payment or a series of payments, the insurance company agrees to provide you with:

• Tax-deferred growth, and/or
• Guaranteed income payments in the future
   

Annuities are commonly used to supplement retirement income and provide financial stability later in life.

There are two main phases of an annuity:

You contribute money either as:

• A lump sum (single premium), or
• A series of payments over time
   

Your funds grow on a tax-deferred basis, meaning you don’t pay taxes on earnings until you withdraw the money.

At a future date — often retirement — you can begin receiving income payments. These payments can be structured:

• For a specific number of years
• For your lifetime
• For you and your spouse’s lifetime
• As systematic withdrawals
   

Offer a guaranteed interest rate and predictable growth. These provide stability and are not directly tied to market performance.

Growth is linked to a market index (such as the S&P 500), but with downside protection. You participate in market gains up to certain limits, while your principal is protected from market losses (subject to policy terms).

Allow you to invest in sub-accounts tied to the market. Growth potential is higher, but so is risk.

The right type depends on your goals, risk tolerance, and income needs.

Annuities offer several key advantages:

Your money grows tax-deferred until withdrawn.

You can create income that lasts for life, helping reduce the risk of outliving your money.

Certain annuities protect your principal from market loss.

Helps create predictable income to supplement Social Security or pensions.

Many policies offer riders for enhanced income, long-term care benefits, or death benefits (additional cost may apply).

An annuity may be suitable if you:

• Are nearing retirement or already retired
• Want to create predictable lifetime income
• Are concerned about market volatility
• Have maxed out other tax-advantaged retirement accounts
• Want to protect a portion of your retirement savings
   

Yes — annuities are long-term financial products and should be carefully evaluated.

Important considerations include:

• Surrender periods and surrender charges
• Early withdrawal penalties (especially before age 59½)
• Fees (particularly with variable annuities)
• Taxation of withdrawals as ordinary income
   

Because of these factors, annuities should align with your broader retirement strategy.

The amount depends on:

• Your retirement income gap
• Other sources of income (Social Security, pensions, investments)
• Your liquidity needs
• Your risk tolerance
   

A retirement income analysis can help determine whether an annuity makes sense and how much to allocate.

Annuities are backed by the financial strength of the issuing insurance company. While they are not FDIC insured, state guaranty associations provide certain protections up to state limits.

It’s important to work with a trusted advisor who evaluates the financial strength of the carrier.

Annuities may be a strong fit if you:

• Want guaranteed income in retirement
• Prefer protection over high-risk growth
• Value financial predictability
• Are planning for long-term income security
   

However, they may not be appropriate if you need full liquidity or short-term access to your funds.

At New Horizon Financial Group, we help individuals and families design retirement income strategies that provide confidence and clarity.

Before recommending an annuity, we review your:

• Retirement goals
• Income needs
• Risk tolerance
• Current financial picture
   

If an annuity fits your strategy, we’ll guide you through the options and help you choose a solution aligned with your long-term goals.

Reach out today for a no-obligation retirement income consultation.