Where Can You Find an Explanation on How an Annuity Works?

Information on how annuities work is available from financial planning and management websites, such as Money.cnn.com and Schwab.com. Annuity information is also available on insurance sites, such as Nationwide.com.

An annuity is a contract for a period of time issued by an insurance company, and is designed to help generate income for a beneficiary over the life of the contract, explain Nationwide. Annuities are typically variable or fixed. Fixed annuities are like a pension and generate payments to the beneficiary over a fixed number of years or for his lifetime, according to Schwab.com. Conversely, variable annuities do not generate a fixed income, and are composed of financial instruments, such as stocks and bonds. Returns on the investments depend on the performance of the instruments.