Despite not being as well known as some other retirement tools, annuities account for 8% of all assets earmarked for retirement. With about $2.2 trillion in assets, annuities hold more funds than Roth IRAs.¹
An annuity is a contract with an insurance company. In exchange for a premium or a series of premiums, the insurance company agrees to make regular payments to the contract holder. The funds held in an annuity contract accumulate tax deferred.
For individuals interested in accumulating retirement assets, annuities can be attractive because they are not subject to contribution limits, unlike most other tax-deferred vehicles. In other words, retirement-minded individuals can set aside as much money as they would like into an annuity.