Editing Annuity (finance) (section)

== How Do Annuities Work? ==

You invest a lump sum—often from a retirement account like a 401(k)—into an annuity contract. Over time, your money grows either at a fixed rate or based on an index (like the S&P 500). Unlike traditional investments, **annuities are not subject to direct stock market losses**.

When you're ready to retire, you can choose to convert the annuity into a steady income stream—often referred to as a **personal pension**.