Important Differences Between IRAs and Annuities

IRAs and Annuities

There are a few similarities between annuities and individual retirement accounts, or IRAs. For example, they are both investment products created to save money for retirement and they offer possible tax benefits. However, there are also many differences between the two, and knowing the differences between an annuity vs. IRA can help you to decide which is right for you.


An IRA is an account through which you invest in stocks, bonds, and mutual funds. An IRA will:

  • Allow you to decide which investments to buy
  • Permit you to keep all of the gains the investments make
  • Offer the opportunity to leave the money in the account to a beneficiary

Nonetheless, the account will only do as well as the investments contained in it and there is no guarantee that there will be sufficient money in the account at the time of your retirement.


Rather than an investment account, an annuity is a type of insurance product. You pay set premiums in order to receive a guaranteed return at the time of the policy’s maturity. An annuity will:

  • Provide a guaranteed payment amount
  • Permit you to leave unpaid funds to a beneficiary
  • Leave you free from the responsibility of choosing investments

Despite these advantages, there is a possibility that inflation will have a negative effect on the purchasing power of the annuity payments.  

Saving for retirement is vital. There are many investment products available that can help you to do so. Consulting a qualified advisor can assist you to make the right choice for your circumstances.