Annuities are one of the most popular investment vehicles being used today to save a significant amount, to save while reducing your taxes or to ensure that you receive a steady flow of income. They are the ideal saving instruments of the twenty-first century.

When you buy an annuity, you end up signing a contract with an insurance company based on certain conditions. You either pay the insurance company a lump sum of money or you make small payments over a period of time. The money that you pay the insurance company keeps growing at a certain amount.

If rate at which your deposit grows is fixed, the annuity is a fixed annuity. However, if your money is invested in the stock market and the growth depends on the performance of the stock market then you have a variable annuity. Sometimes, your money is invested in the stock market but the insurance company assures you of a minimum level beyond which your gains will never fall, it is known as equity indexed annuity.

Based on your agreement with the insurance company, you will receive the value of your deposit at a future date along with the interest you have earned. You can get payment in the form of Term Certain Fixed annuity which is certain specified amounts at regular intervals for a certain time period. You get ask for specified amounts at regular intervals for the rest of your life. This is known as Fixed Life annuity. You can also ask the insurance company to pay you as soon as you deposit the entire amount of the annuity. This is known as Fixed Immediate annuity. Or, you can get paid at later date in the future as specified by you, and this is known as Fixed Deferred annuity.

The best way to choose the best annuity is to first figure out what you want and then try to match the benefits of different annuities to your need. This will help select the annuity that is best suited for your needs.