An annuity is basically a contract you make with an insurance company. You make either a single payment, or a series of payments to the insurer. In return, they will give you back a fixed amount every month, starting immediately, or after some period that you have agreed upon. Typically, annuities will provide for tax-deferred earnings growth and may include a death benefit.

In the case of a retirement annuity, you are able to make a lump-sum deposit right before you retire, when you might have received a large amount of cash from other retirement funds such as work benefits. This deposit is applied to the one-time funding of the retirement annuity. You usually begin to receive the payout after a few months. In this manner, you receive an immediate income upon retiring.

When planning for retirement, annuities are a good option. An annuity is built by paying a small amount every month to an insurance company. As the years go by this will grow into a healthy nest egg in your account. By choosing either a fixed of variable scheme, the money will earn interst or may be used to invest in a variety of equity markets or mutual funds.

The pay back from the insurance company starts when you retire. Depending on the scheme you had chosen, these payments may be for a fixed period, say 20 years, or they may continue for your lifetime. In a fixed annuity scheme, the payments are fixed, while in a variable scheme, the periodic payments will depend on how well your investments had performed.

In contrast, an indexed annuity takes into account the changes in one of the well-known equity indexes. The return will vary based on the changes in the selected index. Typically, there will be a guaranteed minimum return. Equity-indexed annuities combine the features of fixed-return traditional annuities and the equity market, giving the best of both worlds.

Variable annuities are regulated by the SEC, since they work like securities. On the other hand, fixed annuities do not fall under the oversight of the SEC, as they are not based on securities. Because of the fact that an indexed annuity combines both insurance and securities features, it may or may not be regulated by the SEC, as it may or may not be considered a security. It depends on the mix of specific feature in each indexed annuity.