Mutual funds are a part of most people’s investment lexicon, thanks to the 401(k). Annuities though, are another story. An annuity is a contract with an insurance company to get financial benefits in the future. But many people don’t know much about them, and myths abound.

Here’s how to separate fact from fiction.

Myth: If I die young, the insurance company keeps my money.

Fact: If you own an annuity with a “single life only” option and you die soon after your payments begin, the remaining payments cease, says Dan Keady, senior director of advice and planning at TIAA in Charlotte. However, virtually all annuities offer an option for a guaranteed period of payment, which means you or your heirs receive payments for a pre-determined number of years regardless.

Myth: Annuities are only for older investors.

Fact: No matter your current age, an annuity can be a smart way to diversify your portfolio. Fixed-income annuities provide a dependable stream of guaranteed lifetime income.

Myth: Variable annuities have high and hidden fees.

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Fact: “Annuity fees vary based on company and type. You can find lower-cost annuities with features that suit your needs,” Keady says. Read the annuity’s prospectus to understand what you’re getting and paying for.

Myth: I don’t need an annuity. I can withdraw money from my retirement accounts.

Fact: Yes, you can create an income stream from your retirement savings. But if your investments don’t perform as expected, or you live a long life, you may need to decrease your expenses and adjust your investment mix, or risk running out of money.