An annuity contract is a legally binding agreement between you and an insurance company where you provide money (either as a lump sum or through a series of payments) and the insurance company promises to make payments back to you according to specific terms—either immediately or at a future date. This contract spells out exactly how your annuity will work, including payment amounts, timing, duration, fees, and what happens in various scenarios.

The contract details are crucial because they determine everything about your annuity: whether it's immediate or deferred, fixed or variable, how payments are calculated, when and how you can access your money, what surrender charges apply if you withdraw early, what optional features (riders) you've purchased, and what happens to remaining funds if you die. Once you sign an annuity contract, especially when you annuitize, many terms become irrevocable—you can't change your mind later.

This is why understanding your annuity contract before you sign is essential. These documents can be complex and filled with insurance and legal terminology that's hard to parse. Don't hesitate to ask questions, request explanations in plain language, compare contracts from different insurance companies, and consider having a financial advisor or attorney review it before you commit. The annuity contract governs a potentially significant portion of your retirement security, and once the ink is dry, you're generally bound by its terms for years or even for life.