Annuities are a series of payments made by an institution like an insurance company to the annuitant (annuity holder) at regular intervals over a fixed time period. Most of annuity buyers are from middle-class families having household income less than $75,000 a year, and their main objective is to have an income after retirement.

According to one survey, the average age of an annuity buyer is 66 years old and retired. Generally these people think that their financial needs after retirement will not be covered by a pension or other employment related retirement funds. They invest in annuity plans to have guaranteed income. A person can purchase an annuity if a lump sum is received like a pension, the sale of land or house or any inherited property.

A potential annuity buyer, particularly first time buyer, should be very careful in deciding the type of the annuity to invest in and on the insurance company to go with. Some annuities offer guaranteed income and some s do not. Some annuities offer returns even after the death of the annuitant, but some types of annuities provide income only for a fixed time period. The excess income over the total premium amount is tax-free in some types of annuities, whereas in some other cases, the excess income is taxable. Therefore, the buyer has to understand the basic types of annuities in order to decide which type is suitable for their financial situation.

The buyer can seek the help and advice of finance professional or annuity broker.

Before purchasing an annuity, the buyer has to understand the payment options. For instance, the company may pay some types of annuities only after the death of the annuitant and some after a fixed time period ranging from five to twenty years. The buyer should know about front-end loading fees, yearly maintenance fees and surrender charges. Another important point to know is the credit rating of the insurance company by agencies like Standard and Poors and Moodys and Fitch. These agencies assess the insurance companys ability to meet all of its claims on time. After considering all these criteria, annuity buyers need to select the best annuity to purchase and to later on enjoy.