How do annuities work as an investment?

Annuities are financial contracts that employees can purchase from life insurance companies. They are often used in retirement plan administration. They grow tax-deferred and pay out income over time, either for a fixed period or for the rest of the annuitant's life. Employees can buy an annuity on their own or with the help of an employer.

What types of annuities are available to employees?

Common types of annuities include fixed, variable, and indexed. Fixed annuities offer guaranteed payouts, variable annuities fluctuate with market performance, and indexed annuities tie returns to a market index while providing some protection against losses. Other types of annuities include joint and survivor annuities, single life annuities, and tax-sheltered annuities. Each type of annuity comes with different risk and reward levels.

What are the pros and cons of investing in an annuity?

Annuities can aid in long-term planning and help attract talent as part of a company's comprehensive employee benefits management system. However, they may involve high fees, limited liquidity, and complex terms. Employees and employers should evaluate costs and goals before investing in an annuity.