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What Is an Annuity?

Let's start with the basics. An annuity is an insurance contract issued by an insurance company.

An annuity contract has two phases: an accumulation phase and a distribution phase. During the accumulation phase, the contract owner makes a payment or payments into the contract in exchange for either a fixed or a variable rate of return that is not subject to income taxes until withdrawal, permitting the tax-deferred growth of the investment. During the distribution phase, the accumulated value of the annuity contract can be converted into a guaranteed income stream that can last for life or for a set period of time.

Annuities can be a key part of your overall retirement strategy – but they're not right for everyone.

Types of annuities

The two most popular types are fairly intuitive: Fixed annuities have a set payout rate, and variable annuities provide a return based on the performance of the underlying investments ("subaccounts"). In addition, income annuities (sometimes referred to as immediate annuities or deferred income annuities, depending on when income payments begin) are a subset of fixed annuities and can provide income for life or for a specific time period. The links below can help explain the different types of annuities we offer.

Important information

Fees & compensation

Edward Jones receives various payments in connection with the purchase, sale and holding of annuities by its clients. Those payments include commissions, annual service fees and expense reimbursements. The firm also receives revenue sharing from some of its preferred annuities. For more information about revenue sharing, see the above link. Edward Jones financial advisors and equity owners benefit financially from the firm’s receipt of these fees and payments.

How we can help

Your financial advisor can help you figure out if an annuity makes sense for you. Talk to us about how we can help you define your goals, using specially designed tools, and then help you stick with the appropriate strategy designed to help achieve them.

Important Information:

Variable annuities are offered and sold by prospectus. You should consider the investment objective, risks, and charges and expenses carefully before investing. The prospectus contains this and other information. Your Edward Jones financial advisor can provide a prospectus, which should be read carefully before investing.

Guarantees are subject to the claims-paying ability of the issuing company.

Edward Jones is a licensed insurance producer in all states and Washington, D.C., through Edward D. Jones & Co., L.P., and in California, New Mexico and Massachusetts through Edward Jones Insurance Agency of California, L.L.C.; Edward Jones Insurance Agency of New Mexico, L.L.C.; and Edward Jones Insurance Agency of Massachusetts, L.L.C.

Edward Jones receives payments known as revenue sharing from certain mutual fund companies, 529 plan program managers and insurance companies (collectively referred to as “product partners”). For more information see Revenue Sharing Disclosure.

More Resources:

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