As we all age, we start to think about a life where we don't have to punch in the 9 to 5 clock. Though the way things look that time may never come. The government keeps pushing back the retirement age. At the rate things are going, we may have to work until we're 100 years old. Most people still live check to check and since so many US companies have sent their high paying jobs to other countries, many Americans are having to work two jobs, just to pay the same bills they once were able to pay with one. But for people who may have some money to invest in their future; there are some things they can do.

One of those things is an annuity. An annuity is an investment that pays you back a certain amount of income over a certain period of time. This form of investment is not new. Annuities date back to the Romans. Roman citizens would make a one-time payment into something called the annua and for this they were promised that they would get payments back, over the course of their lives. Even the Middle Ages had an annuity, it was called tontines. The tontines paid an income for life and if one of the policy holders died, then the payments would be shared with the survivors.

Annuities didn't hit America until the 18th century. A company in Pennsylvania, in 1759, was created to benefit ministers and their families. It took until 1912 before Americans could buy annuities as individuals. Annuities really became popular in the 1930s. On the heels of the Great Depression, people were uncertain about the financial markets. Many people bought annuities from insurance companies during this time, because they felt insurance companies were stable and would be around to pay them.

In the US, annuity contracts are regulated by each state on an individual basis. What this means is that a contract that maybe valid in one state, may not be valid in another. Insurance companies are the only ones allowed to sell annuity contracts in the US. There are two types of annuity contracts, the immediate and the deferred. The immediate annuity will guarantee payments for a certain number of years or for the lifetime of the policy holder. The deferred annuity is allowed to grow and earn interest, without being taxed. Of course, when the policy holder wants to cash-out their annuity, they will be taxed.

It's been stated many times that most Americans don't have $250 in the bank. When you consider that most people do work and they've most likely been working for years; to have less than $250 doesn't speak well for their financial situation. The government has been stressing the benefits of saving for years. Probably because they know how messed up the Social Security system really is; and there may be a group of retired Americans who will not get back any of the money they paid in, over the course of their working lives. It's a big dilemma for poor people. Do you try to save for tomorrow, or pay your rent?

Michael Russell Your Independent guide to Annuity