Choosing an Annuity That’s Right for You

No two people heading into retirement have the same set of needs, preferences, or goals. That’s why there are different types of annuities from which you can choose. Adding an annuity to your overall retirement portfolio can provide you with several valuable benefits, including protected lifetime income.

There are basically three types of annuities: Fixed, Index and Variable. With each, you can choose when to begin receiving income, whether right away, soon after purchase, or later, in which case payments typically begin 12 months or more after purchase, on a date you determine. It’s important to understand that there are fees and expenses associated with owning an annuity, and that they may not be right for everyone. Annuities offer protected lifetime income, but that guarantee is dependent upon the financial strength of the insurance company that issued it. It’s a good idea to speak with a financial professional who can guide you before making any decisions.

Fixed Annuity

About Features Considerations
Designed for people who want to draw protected income from their annuity for retirement. It provides a fixed interest rate that offers a high level of predictability, along with flexible payment choices.
  • Rate of interest is guaranteed for a specific time period.
  • Protection from market downturns. 
  • A choice of payment options, including protected lifetime income for as long as you live. 
  • Income can begin immediately or be deferred to a later date. 
  • You may not have to pay taxes on any interest earned until you withdraw money.
There may be charges and a tax penalty for early withdrawals.

Index Annuity

About Features Considerations
Designed for people who want to take advantage of potential gains in the stock market while still having some level of protection against losses. The interest from it is linked, in part, to the performance of a market index, such as the S&P 500 Index. When the index increases, you’ll receive interest — based on what’s specified in your annuity contract. If the index declines, you won’t receive interest, but the principal of your annuity will not be affected.
  • The potential to grow based in part on the performance of a market index.
  • Protection from market downturns since the value of the annuity is not affected by negative index returns. You are not directly invested in any security or index.
  • You may not have to pay taxes on any interest earned until the money is withdrawn.
  • A choice of payment options, including protected lifetime income for as long as you live.
  • Income can begin immediately or be deferred to a later date.
  • Standard or enhanced death benefit features are available for an additional fee.*

There may be charges and a tax penalty for early withdrawals.

In a down market, your annuity may not earn interest.

Variable Annuity

About Features Considerations

Designed for people to take advantage of both income protection and growth in their retirement savings and are willing to take more risk with their money in exchange for the potential for a higher rate of return. 

The rate of return is tied to professionally managed funds, made up of a combination of stocks, bonds and other investments. The value can move up or down depending on the performance of the underlying funds selected.  You can benefit when the investments go up but lose money if they go down.  Optional features can provide protection from market volatility.

  • Potential to benefit from market increases. 
  • Professional money management with a choice of investment options. 
  • You may not have to pay taxes on any interest or earnings until money is withdrawn. 
  • Optional features that protect your retirement income from market volatility and provide protected lifetime income for as long as you live. 
  • Income can begin immediately or be deferred to a later date.
  • Standard or enhanced death benefit features are available for an additional fee.*

You could lose some or all of your principal depending on the performance of the underlying funds. 

There may be charges and a tax penalty for early withdrawals.

*Optional features may have additional costs based on choice.

Connect with your financial professional to learn if an annuity is right for you.


Annuities are long-term financial products designed for retirement purposes. Early withdrawals may be subject to withdrawal charges. Partial withdrawals may reduce benefits available under the contract. Withdrawals of taxable amounts are subject to ordinary income tax and, if taken prior to age 59½, an additional 10% federal tax may apply. Optional income protection features are subject to additional fees, requirements and other limitations. Keep in mind, for retirement plans and accounts (such as IRAs and 401(k)s), an annuity provides no additional tax-deferred benefit beyond that provided by the retirement plan or account itself. Contract and optional benefit guarantees are backed by the financial strength of the issuing insurer. There is no guarantee that any investment will achieve its objectives, generate positive returns, or avoid losses. Investments in annuity contracts may not be suitable for all investors.

This material has been prepared in conjunction with Milliman Financial Risk Management LLC (Milliman FRM). Milliman FRM retained Northern Lights Distributors, LLC, a FINRA/SIPC member, to facilitate FINRA review of the material in order to meet certain requirements of its business partners. Northern Lights Distributors, LLC is not affiliated with Milliman FRM or The Alliance for Lifetime Income.

AIG is a founding member of the Board of Directors for the Alliance for Lifetime Income.