Annuities and IRAs: Key Differences You Should Know

There are many ways to save for retirement. Knowing the difference between annuity and IRA investments can help determine if one of these retirement savings vehicles works for you.

Funding Your Annuity

With an annuity, the account holder funds their account with a lump-sum payment or regular payments during what is called the accumulation phase. In return, they are provided with a fixed income stream at a predetermined date in the future. There are no contribution limits for annuities.

Funding Your IRA

For an IRA, funds are deposited into a brokerage account, then invested into the stock market. Deposits for a given tax year can be made up through April 15th of the following year but are subject to IRS contribution limits.

Investment Choices

To protect the principal, insurance companies generally invest the funds for an annuity into a less-risky, fixed-income investment vehicle such as bonds. The income from an IRA depends on the account’s rate of return. This is determined by the stocks, mutual funds, ETFs, and bonds in which the account invests.


An annuity provides more flexibility in ownership, with the option for an individual or joint account, whereas an IRA is only for an individual account holder.
Annuities and IRAs are two ways to save for retirement and provide income for your future.