An annuity allows a customer to deposit money (premiums) with an insurance company that can earn interest and grow on a tax-deferred basis with the agreement that the insurance company will then provide a series of payments back to the customer at regular intervals. People typically purchase annuities to provide or supplement retirement income they will receive from Social Security, pension benefits, investments and other sources. They can convert their annuities into a stream of income that can then be paid over a fixed period or for your lifetime. They can take withdrawals of varying amounts when they need the income.

Unlike other tax-deferred retirement accounts such as 401(k)sand IRAs, there is no annual contribution limit for an annuity. That allows your client to put away more money for retirement, and is particularly useful for those that are closest to retirement age and need to catch up.

All the money they invest compounds year after year without any tax bill from Uncle Sam. That ability to keep every dollar invested working for your client can be a big advantage over taxable investments.

When you cash out, your client can choose to take a lump-sum payment from your annuity, but many retirees prefer to set up guaranteed payments for a specific length of time or the rest of your life, providing a steady stream of income. The annuity serves as a complement to other retirement income sources, such as Social Security and pension plans.