Whether you’re a retiree seeking an income stream that you can’t outlive or a new investor building a well-rounded retirement savings plan, buying an annuity can offer financial security and peace of mind. Learn more about buying the annuity that’s right for you.

How To Buy an Annuity

You generally purchase annuities through an insurance company, but you can also buy them from brokerage firms, financial planners, independent insurance agents and banks also provide them.

Unlike stocks and mutual funds, annuities are insurance contracts. This means you purchase them differently than other financial products. But, by following the steps below, you’ll be well-equipped to find an annuity ideally suited to your goals

Step 1: Assess Your Financial Situation and Establish Goals 

The first step to buying an annuity is to assess both your present and future financial situation. What are the goals you want to achieve, and how can an annuity get you to those goals?

Understanding your financial journey means making informed decisions about how much you should invest for the future. Delving deeper into how much to invest can provide clarity and set you on the right path.

Furthermore, knowing current annuity rates can be a game-changer when considering long-term financial stability and planning for retirement.

If needed, consulting with a trusted financial advisor can help you determine these goals.

Step 2: Choose an Annuity Product 

Once you’ve clarified your objectives, you can choose an annuity product that meets your needs and aligns with the goals you’ve defined. Because annuities are highly customizable products, you can tailor them to provide income, growth, a death benefit and more.

The riders and provisions you use to customize your contract do add extra costs, but can be worth it to make your annuity work for your needs.

Step 3: Research Annuity Providers With Strong Credit Ratings

Along with choosing an annuity product, you’ll also need to select an annuity provider.

“Once you’ve decided an annuity purchase is right for you, be sure to conduct due diligence on the issuer,” Certified Financial Planner™ professional Brandon Renfro told Annuity.org. Do some research to find companies that specialize in the type of annuity you want and have strong credit ratings from financial rating agencies.

Step 4: Apply for the Annuity and Sign the Contract

The next step is working with the annuity provider — and, ideally, your financial advisor — to apply for and sign an annuity contract. Comparing contracts for similar products and rates from a few different companies can help you make the best decision for you. Remember that you can customize the contract until you’ve tailored it to your needs.

Make sure you also understand all provisions of your annuity contract, including any fees and commissions.

Step 5: Fund Your Annuity With a Premium Payment 

After signing the contract, you’ll transfer the money for the annuity premium payment. You can purchase an annuity with cash, retirement funds or by transferring money from a brokerage account.

Each payment type has tax consequences to consider carefully before you pay the premium.

The annuity’s free-look period begins once the annuity provider issues a contract. This period typically lasts 10 to 30 days, during which you can cancel the annuity contract and receive a refund. Take advantage of this time to review the annuity contract and make sure it meets all the objectives you have for this product.

Q&A With an Annuity Customer

Annuity.org spoke with annuity owner Ron Thompson about his annuity purchase experience.

Complex financial products like annuities or life insurance can be especially intimidating. It is essential to explore a purchase over time, sometimes months or longer. Weigh your options carefully and in partnership with an unbiased third-party advisor.

Stephen Kates, CFP®Founder of Clocktower Financial Consulting

Read More: How to Customize an Annuity

How Do I Choose the Best Annuity for Me?

“The decision to purchase an annuity is very personal,” Marguerita Cheng, Certified Financial Planner™ professional, told Annuity.org. “Every investor’s financial situation is unique.”

Because choosing an annuity is a highly individualized decision, it requires a clear understanding of your financial situation, goals and risk tolerance to figure out which product is best for you.

Questions to consider:

• Are you looking for guaranteed income or long-term growth?
• How close are you to retirement?
• What other income streams do you have in place?
• Are you prepared for lifestyle changes that come with retirement and the loss of a steady income?
• Does your family have a history of longevity and are you in good health?

Given the complexity of annuities — and of finances as a whole — it’s important to talk to a professional who can help you evaluate your retirement portfolio and explain your financial options.

Annuities Tailored To Specific Lifestyles

Certain groups may find annuities particularly beneficial. Below are a few of the most common, but this list is not exhaustive.

These groups represent just a few examples of types of people who can benefit from annuities. Their adaptability, safety and competitive rates make them an attractive product for many.

Where Can I Buy an Annuity?

You can buy an annuity from various legitimate companies and providers. Many insurance companies offer annuities, and you can contact them to learn more about their options and customize an annuity that makes the most sense for your needs.

Banks, insurance agents, financial planners and financial firms also market and sell annuities. However, only life insurance companies can legally issue annuity contracts.

Some annuities, especially less complex options, are available for purchase entirely online.

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Frequently Asked Questions About Buying Annuities