An annuity is an insurance contract that offers tax-deferred savings for retirement and a choice of income options to meet an individual's needs in retirement. Because annuities offer the option of a guaranteed income for life, annuities can help protect retirees against the possibility of outliving their financial resources.

Finding a way to make savings last is a challenge for today's workers and retirees. Fewer workers today are covered by traditional, employer-sponsored pension plans promising life-long benefits and Social Security is not likely to provide future retirees the level of benefits it provides today.

Because an annuity can provide lifetime income it helps offset worries many people have about managing their finances, running out of money in retirement, or living more frugally than they need to. No other personal financial product offers guaranteed income for life.

Annuities can be immediate or deferred. A deferred annuity addresses both pre-retirement savings and post-retirement income needs. If a person is years away from retirement, or is retired and doesn't need income right away, a deferred annuity allows savings to accumulate tax deferred until payouts begin.

If a person needs income right away, an immediate annuity turns a sum of money into a series of guaranteed payouts. The annuity owner decides whether to receive income for life or for a defined period of time.

An annuity is a flexible retirement planning tool. It can be purchased over time (through a series of premium payments) or with a single lump sum. It can accumulate value that is based on a fixed interest rate or through investments in equities. You choose how and when payouts are made to you.

Because there are so many choices, ACLI recommends a thorough review of personal finances, retirement goals, and anticipated needs before making a purchase. ACLI also suggests seeking the informed counsel of a financial planner, insurance agent, or broker.