A contract made with an insurance company is called an annuity. You can choose one of two ways to deposit your premium, a single payment or a series of them to the insurer. What you get in return is a fixed income amount every month, again you can choose to have your income start immediately or after some period agreed with the company. Usually, annuities may include a death benefit and will provide tax-deferred earnings growth.

A lump-sum of money can be invested into a retirement annuity using income you may receive from fixed deposits or benefits from work. You would make a one-time payment with these benefits into the annuity. In this way, after a few months, you would begin receiving immediate income upon retirement.

Annuities are a good way for retirement planning. During your working life, you can pay a small amount every month to the insurance company. Over a period of years, this can build up into a healthy amount in your account. Depending on the type of account you have chosen, fixed or variable, your money will be earning interest or may be invested in various equity markets or mutual funds.

The pay back from the insurance company starts at a point in time that you choose, typically 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 perform.

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.