Annuities are retirement savings plans similar to bank savings accounts and CDs but are issued by life insurance companies and typically offer better interest rates. You pay in so that some day you will receive pay out. An annuity is a contract between you and an insurance company in which you give the insurance company a specific amount of money over a period of time or in a lump sum and the insurance company agrees to make payments to you for a fixed amount of time or a fixed amount per month, usually starting when you retire.