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What Is an Annuity?

An annuity can provide you with guaranteed lifetime income and help you increase tax-deferred savings as part of your overall retirement savings plan.

Why own an annuity?

An annuity can be, if appropriate, an effective part of your overall retirement strategy. Answer a few questions to determine if an annuity may be a good fit for you.

For guaranteed lifetime income

If you’re in or near retirement and are trying to find ways to convert your assets into regular income for life, you may want to consider a lifetime income annuity. A lifetime income annuity can:

  • Provide you with reliable retirement income for the rest of your life
  • Offer flexible payments – monthly or annual payments that are guaranteed for your lifetime (and potentially your spouse’s lifetime) with the additional option to guarantee the income for a specific period for your beneficiaries
  • Offer opportunities to invest according to your objectives to achieve potential growth
  • Be customized to meet your specific needs
  • May offer favorable tax treatment

Annuities that offer lifetime income include immediate annuities and variable annuities with a lifetime income option.

For tax-deferred savings

If you’re saving for retirement, you may want to consider a deferred annuity. A deferred annuity can:

  • Offer you an alternate way to build tax-deferred earnings
  • Allow you to contribute as much money as you would like, unlike other tax-deferred retirement savings vehicles that have IRS annual contribution limits
  • Provide you a variety of future income options

Two popular types of deferred annuities for saving for retirement are index annuities and fixed annuities.

Annuities can either be “immediate” or “deferred”

Immediate annuities

An immediate annuity is established with a single lump-sum premium. This could be retirement assets you've accumulated over time, a retirement or severance package, a rollover of your 401(k) plan or Individual Retirement Account (IRA), proceeds from the sale of a business, an inheritance, or other large payment you've received.

Your immediate annuity payments can start as soon as 30 days after you purchase the annuity. Or you can choose to defer the start date one year, during which time you'll continue to earn tax-deferred compounded returns.

Deferred annuities

With a deferred annuity, your assets grow tax-deferred until you decide to take your money out. Additionally, many annuities offer flexible options that would allow you to create a lifetime income stream.

You can choose a variable or a fixed annuity

Depending on your investing style and risk tolerance, you can choose either a “variable” or “fixed” investing option for an immediate or deferred annuity.

Variable annuity

A variable annuity allows you to choose from a variety of investment options called subaccounts. Subaccounts are professionally-managed investment options that invest in stock, bond, and/or other investments.

Your account value will fluctuate depending on the performance of the subaccounts you select, and may be more or less than the original amount invested. Variable annuities may offer opportunities to provide guaranteed lifetime income for an additional cost.

Fixed annuity

With a fixed annuity, you receive a fixed rate of return on your premium payment. Rates are guaranteed by the insurance company and are used by investors who do not want market exposure.

All guarantees are backed by the continued claims-paying ability of the issuing insurance company.

Why purchase an annuity through Wells Fargo?

Wells Fargo offers a wide range of annuities to help you take advantage of retirement income and savings opportunities. We can help you understand how an annuity works, including its features, benefits, surrender charges, and potential investment risks.

We are here to help you decide which annuity is right for you. To get started, contact a Wells Fargo retirement professional today.

Have a question? Request a Consultation

Call us 1-866-246-5056

Variable annuities are long-term investments suitable for retirement funding and are subject to market fluctuations and investment risk.


The underlying funds in a variable annuity are invested in subaccounts, which are professionally managed investment options that invest in stock and/or bond markets.

The investment options may provide you with potentially more income than immediate fixed annuities, but your income payments will be subject to market fluctuation.