A fixed annuity is a tax deferred savings plan with a death benefit offered by an insurance company. It's a way to accumulate money over a long period of time.   Taxes are deferred until funds are withdrawn, any funds not withdrawn prior to the time of death can be passed on to a survivor. 

 

An annuity can be non-qualified, funded with personal savings or qualified and funded with pre-tax dollars. Once you are ready to use the money you've accumulated, it's available in a lump sum or a variety of payout options, including a steady income guaranteed for life. In most instances under a non-qualified annuity, part of the income you receive is non-taxable, since it is a return of principal. In the event of death, if a beneficiary has been designated, the remaining amount bypasses probate without any court costs, delay or publicity.