ANNUITIES DEMYSTIFIED
Annuities can offer protection, growth potential, and can create lifetime income, but are sometimes misunderstood. Let’s set the record straight.
What are annuities?
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What is an annuity?
Benefits of annuities
Myth vs. fact
FAQs
Resources
What is an annuity?
An annuity is a contract with an insurance company that can help provide protected growth for your retirement savings, while giving you options for protected, lifetime income—now or later. They work best as part of a well-rounded financial plan which can include growth investments like stocks, safety nets like cash or bonds, and other guaranteed income sources like pensions and social security.
Legacy Protection
Flexibility
Tax-Deferred Growth
Protected Growth
Protected Income
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Most annuities include death benefits, guaranteeing your beneficiaries will receive a specific amount if you pass away before withdrawing your money in retirement.
FUTURE
YOUR LOVED ONES'
SECURE
Beneficiary Benefits
Learn more
Many annuities offer flexible or optional features so you can customize your strategy to meet your needs.
FOR THE UNKNOWN
PREPARE
Flexibility
Learn more
Earnings on the money invested in an annuity generally grow tax-deferred, so you don't pay taxes on the earnings until you withdraw the money.
OF YOUR MONEY
IN PLAY
MORE
KEEP
Tax Deferred Growth
Learn more
Some annuities have features which can limit or even prevent loss due to market downturns. That means any hard-earned growth is protected no matter what the market does.
YOUR SAVINGS FROM SUDDEN DOWNTURNS
CUSHION
Protected Growth
Learn more
Most annuities can provide a guaranteed income stream, so you can enjoy a greater sense of financial security for as long as your retirement lasts.
1 IN 4
Americans who reach age 65 will live past 90*
Protected Income
How can an annuity help me prepare for retirement?
Myth
Fact
Annuities are too technical and complicated.
Your money is locked up in an annuity.
Though annuities are designed to be long-term investments, most let you access a portion of your money if you need it. Rules vary so it's important to understand your options, but flexibility is offered.
Annuities have low rates of return.
Some annuities offer fixed, lower returns because your money is protected from market loss. Others offer unlimited growth but have more risk. You can pick from a variety of options based on your specific goals.
Annuities are expensive.
Most annuities offer fair and transparent pricing for the value they provide, and some even offer no explicit fees.
Debunking annuity myths
Annuities often sound complex due to the jargon surrounding their high-value benefits, The Alliance for Lifetime Income created an annuity glossary to help simplify.
You have to die to benefit from an annuity.
Not true. Annuities are designed to offer value during retirement while the owners are still alive—by providing protection, growth opportunity, and guaranteed income for life.
What are the common types of annuities?
Your Questions About Annuities—Answered
From the different types and benefits to tax implications and what happens down the road—we’ve got answers to help you feel confident about your financial future.
Are annuities right for me?
How do annuities work and when can I access my money?
Are annuities taxable?
What happens to my annuity when I pass away?
What should I look for in a company when buying an annuity?
What are the common types of annuities?
Are annuities right for me?
How do annuities work and when can I access my money?
Are annuities taxable?
What happens to my annuity when I pass away?
What should I look for in a company when buying an annuity?
Fixed Annuity: Your initial investment is protected and earns fixed interest annually.
Fixed Indexed Annuity: Your money grows based on market indices you choose. You’re protected from market losses, but there’s a cap on earnings.
RILA (Registered Index-Linked Annuity): You choose how your money grows and how much market protection you want. You could earn more, or potentially lose money, based on risk tolerance, choices, and market fluctuations.
Variable Annuity: You choose from various investments that follow the market—offering unlimited growth potential, but also higher risk.
What are the common types of annuities?
You're seeking guaranteed income you can't outlive: Many annuities offer protected lifetime income throughout your retirement years.
You prefer stability over market risk: Annuities can help reduce market risk, protect your savings, and turn a portion of your retirement funds into predictable income—making budgeting easier and your financial future more secure.
You want to protect and grow your retirement savings: Annuities can be funded with money from your 401(k), 403(b), or IRA, offering tax-deferred growth and protected income to help strengthen your retirement strategy.
How do annuities work and when can I access my money?
Are annuities taxable?
What happens to my annuity when I pass away?
What should I look for in a company when buying an annuity?
Are annuities right for me?
What are the common types of annuities?
Are annuities right for me?
Work with a financial advisor to purchase an annuity from an insurance company, with either a lump sum or multiple payments.
Invest for the future through protected growth options or access income for retirement purposes.
When you’re ready, you can access your money in multiple ways. You have access to one-time withdrawals, often penalty free, when you need them and also to guaranteed income that will last you and a loved one’s life.
Are annuities taxable?
What happens to my annuity when I pass away?
What should I look for in a company when buying an annuity?
How do annuities work and when can I access my money?
What are the common types of annuities?
Are annuities right for me?
How do annuities work and when can I access my money?
Annuities grow tax-deferred, but withdrawals are taxed based on how the annuity was funded.
Pre-tax money (e.g., 401(k)): Entire withdrawal is taxable.
After-tax money: Only earnings are taxed.
Roth funds: Withdrawals may be tax-free if rules are met.
Keep in mind, taking out money early from your annuity could mean extra taxes or fees. Talk to a financial professional to understand what may apply.
What happens to my annuity when I pass away?
What should I look for in a company when buying an annuity?
Are annuities taxable?
What are the common types of annuities?
Are annuities right for me?
How do annuities work and when can I access my money?
Are annuities taxable?
Most annuities give money to your loved ones after you pass away. They’ll get either what you paid in (minus any withdrawals) or what the account is currently worth—whichever is more. Some annuities also offer enhanced benefits, like extended payouts, for an additional cost, as well as spousal options which would provide uninterrupted income for the life of the surviving spouse.
What should I look for in a company when buying an annuity?
What happens to my annuity when I pass away?
What are the common types of annuities?
Are annuities right for me?
How do annuities work and when can I access my money?
Are annuities taxable?
What happens to my annuity when I pass away?
When choosing an annuity provider, look for financial strength and a solid reputation. You want confidence they’ll deliver on long-term promises. Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey are members of the Prudential Financial family of companies and is the issuer of annuities. It is highly rated by the major independent rating agencies for its ability to meet financial obligations.
What should I look for in a company when buying an annuity?
Retire confidently with financial protection
Annuities aren’t one-size-fits-all, but they can offer a variety of benefits to help prepare for retirement—especially when combined with other savings. Talk to a financial professional to see if one fits your goals.
Find an Advisor
Resources for your retirement strategy
Deciding between an IRA and an annuity?
Will you have enough money in retirement?
Looking for reliable income in retirement?
See how each option fits your goals—and how combining them can give you more flexibility and protection.
Get a clearer view of your retirement needs—see if you're on track and what to adjust with our easy-to-use calculator.
See how deferred annuities can grow your savings and provide a stream of income in retirement.
* Social Security Administration, Calculators: Life Expectancy Annuities are issued by Pruco Life Insurance Company (in New York, by Pruco Life Insurance Company of New Jersey), Newark, NJ (main office) and distributed by Prudential Annuities Distributors, Inc., Shelton, CT. All are Prudential Financial companies and each is solely responsible for its own financial condition and contractual obligations. This material is being provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any client or prospective clients. The information is not intended as investment advice and is not a recommendation about managing or investing your retirement savings. If you would like information about your particular investment needs, please contact a financial professional. Annuity contracts contain exclusions, limitations, reductions of benefits, and terms for keeping them in force. Your licensed financial professional can provide you with complete details. You should carefully consider your financial needs before investing in annuity products and benefits. All references to guarantees, including optional benefits, are backed by the claims paying ability of the issuing company and do not apply to the underlying investment options. The third party broker dealer/agency, or any of its affiliates, selling the annuity are not responsible for making those payments, and none makes any representations or guarantees about the issuers claims paying ability. We do not provide tax, accounting, or legal advice. Clients should consult their own independent advisors as to any tax, accounting, or legal statements made herein. Withdrawals in excess of the income amount impact the value of a product or benefit and can also affect the certainty of the income. An excess withdrawal occurs when cumulative Lifetime Withdrawals exceed the income amount in an annuity year. If an excess withdrawal is taken, only the portion of the Lifetime Withdrawal that exceeds the remaining income amount for that year will proportionally and permanently reduce future guaranteed amounts. If an excess withdrawal reduces the account value to zero, no further amount would be payable and the contract terminates. A variable annuity is a long-term investment designed for retirement purposes. Investment returns and the principal value of an investment will fluctuate so that an investor’s units, when redeemed, may be worth more or less than the original investment. Withdrawals or surrenders may be subject to contingent deferred sales charges. Withdrawals and distributions of taxable amounts are subject to ordinary income tax and, if made prior to age 59½, may be subject to a 10% additional tax. Withdrawals reduce the account value and the living and death benefits. 1084334-00002-00
Beneficiary Benefits
Flexibility
Tax-Deferred Growth
Protected Growth
Protected Income
Learn more
Most annuities include death benefits, guaranteeing your beneficiaries will receive a specific amount if you pass away before withdrawing your money in retirement.
FUTURE
YOUR LOVED ONES'
SECURE
Beneficiary Benefits
Learn more
Many annuities offer flexible or optional features so you can customize your strategy to meet your needs.
FOR THE UNKNOWN
PREPARE
Flexibility
Learn more
Earnings on the money invested in an annuity generally grow tax-deferred, so you don't pay taxes on the earnings until you withdraw the money.
IN PLAY
OF YOUR MONEY
KEEP MORE
Tax Deferred Growth
Learn more
Some annuities have features which can limit or even prevent loss due to market downturns. That means any hard-earned growth is protected no matter what the market does.
YOUR SAVINGS FROM SUDDEN DOWNTURNS
CUSHION
Protected Growth
Learn more
Most annuities can provide a guaranteed income stream, so you can enjoy a greater sense of financial security for as long as your retirement lasts.
could run out of money3
65
Protected Income
Myth
Myth
Myth
Myth
Fact
Fact
Fact
Fact
* Social Security Administration, Calculators: Life Expectancy Annuities are issued by Pruco Life Insurance Company (in New York, by Pruco Life Insurance Company of New Jersey), Newark, NJ (main office) and distributed by Prudential Annuities Distributors, Inc., Shelton, CT. All are Prudential Financial companies and each is solely responsible for its own financial condition and contractual obligations. This material is being provided for informational or educational purposes only and does not take into account the investment objectives or financial situation of any client or prospective clients. The information is not intended as investment advice and is not a recommendation about managing or investing your retirement savings. If you would like information about your particular investment needs, please contact a financial professional. Annuity contracts contain exclusions, limitations, reductions of benefits, and terms for keeping them in force. Your licensed financial professional can provide you with complete details. You should carefully consider your financial needs before investing in annuity products and benefits. All references to guarantees, including optional benefits, are backed by the claims paying ability of the issuing company and do not apply to the underlying investment options. The third party broker dealer/agency, or any of its affiliates, selling the annuity are not responsible for making those payments, and none makes any representations or guarantees about the issuers claims paying ability. We do not provide tax, accounting, or legal advice. Clients should consult their own independent advisors as to any tax, accounting, or legal statements made herein. Withdrawals in excess of the income amount impact the value of a product or benefit and can also affect the certainty of the income. An excess withdrawal occurs when cumulative Lifetime Withdrawals exceed the income amount in an annuity year. If an excess withdrawal is taken, only the portion of the Lifetime Withdrawal that exceeds the remaining income amount for that year will proportionally and permanently reduce future guaranteed amounts. If an excess withdrawal reduces the account value to zero, no further amount would be payable and the contract terminates. A variable annuity is a long-term investment designed for retirement purposes. Investment returns and the principal value of an investment will fluctuate so that an investor’s units, when redeemed, may be worth more or less than the original investment. Withdrawals or surrenders may be subject to contingent deferred sales charges. Withdrawals and distributions of taxable amounts are subject to ordinary income tax and, if made prior to age 59½, may be subject to a 10% additional tax. Withdrawals reduce the account value and the living and death benefits. 1084334-00002-00
Deciding between an IRA and an annuity?
See how each option fits your goals—and how combining them can give you more flexibility and protection.
Get a clearer view of your retirement needs—see if you're on track and what to adjust with our easy-to-use calculator.
Will you have enough money in retirement?
See how deferred annuities can grow your savings and provide a stream of income in retirement.
Looking for reliable income in retirement?
Resources for your retirement strategy
Retire confidently with financial protection
Annuities aren’t one-size-fits-all, but they can offer a variety of benefits to help prepare for retirement —especially when combined with other savings. Talk to a financial professional to see if one fits your goals.
Find an Advisor