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A contract made with an insurance company is called an annuity. You can choose one of two ways to deposit your premium, a single payment or a series of them to the insurer. What you get in return is a fixed income amount every month, again you can choose to have your income start immediately or after some period agreed with the company. Usually, annuities may include a death benefit and will provide tax-deferred earnings growth.

With a retirement annuity, you can invest a lump-sum amount just before retirement, when you may receive a large amount from fixed deposits or work benefits. This amount goes towards making the one-time payment for the retirement annuity. The payout usually starts after one to twelve months and gives you an immediate income when you start retirement.

Annuities are a good way for retirement planning. During your working life, you can pay a small amount every month to the insurance company. Over a period of years, this can build up into a healthy amount in your account. Depending on the type of account you have chosen, fixed or variable, your money will be earning interest or may be invested in various equity markets or mutual funds.

Upon retirement, the insurance company starts paying you from your annuity. You may recieve these payments for a set amount of time, 20 years, for example, or they may continue for the rest of your life. These payments may either be fixed, if you have chosen a fixed annuity, or if you have chosen a variable scheme, the payments will depend on the activity of your investments.

An indexed annuity takes into account the changes in one of the well-known equity indexes. Returns vary based on the changes in the selected index. Usually there is a guaranteed minimum return. Equity-Indexed annuities give you the best of two worlds by combining the features of fixed-return traditional annuities and the equity market.

The SEC regulates variable annuities since these are treated in a manner similar to securities. By way of contrast, fixed annuities are not regulated by the SEC since these are not regarded as securities. Depending on the combination of insurance and securities features included in an indexed annuity, it can be regarded as a security. However, the SEC does not usually regulate indexed annuities.