Annuities are a potential retirement strategy if you are looking for an even distribution of money throughout your life to mimic receiving a paycheck. If you need assistance keeping to a budget, an annuity could be a potential solution. An annuity is a distribution of money earned on an investment, typically on an insurance product, that is doled out to the holder on a monthly, quarterly, biannual, or annual schedule, or even in a lump sum. 

The size of payments received are determined by numerous factors: the length of time for the payment period, the type of annuity or the fees that can reduce your return. There are two primary types or annuities - fixed and variable.

A fixed annuity provides you with the same income revenue coming in at every distribution period. Whether the market is strong or in decline, a fixed annuity will remain constant for the life of the account that was predetermined upon signing up. In contrast, a variable annuity distributes different sums at every period because the amount is determined by the success of the account's investments and the current market. This can result in lean payments or very large payments - creating uncertainty for you.

There are benefits to investing in an annuity. Annuities offer you the opportunity to invest more money in a shorter period of time than any other tax-deferred investment. Unlike a 401(k), there is no annual contribution limit allowing you to increase your savings faster if you are starting a retirement plan later in life. When combined with a set distribution plan, annuities can be a positive investment strategy for many people.

However, there may also be potential negatives. If you are planning on entering into an annuity as a potential retirement investment, research the expenses attached to the account. Annuities can often charge high fees, and you should be aware of all potential conditions before signing a contract.  Either annuity option will require an annual fee that comprises an annual insurance charge that can be as high as 1.25 percent or more, and an annual investment management fee that will range 0.5 percent to more than 2 percent on average, according to CNN.com.

Annuity holders are often hit with a commission charge because insurance brokers are typically involved in their purchase. Commission charges can be as much as 10 percent, the news source reports.

Research and consultation with a personal finance planner could assist your decision on whether an annuity is the right retirement plan for you.