An annuity is a financial product that provides a series of payments made at equal intervals. It is a contract between an individual and an insurance company, where the individual pays a premium, and in return, they receive a fixed income stream in the future. Annuities can be used for various purposes, such as regular deposits to a savings account, monthly home mortgage payments, monthly insurance payments, and pension payments.
Annuities can be classified into different types, such as fixed, variable, indexed, and immediate annuities. The type of annuity an individual purchases determines their future annuity payments. An annuity can be helpful for consumers looking to close the retirement gap, the period in which their savings and retirement income aren’t enough to cover all their expenses. Annuities can offer guaranteed income for the lifetime of the annuitant and help supplement an existing retirement account if those savings are not enough.
An annuity fund is the investment portfolio in which an annuity holders funds are invested. The annuity fund earns returns, which correlate to the payout that an annuity holder receives. Annuities can be a safe and beneficial financial instrument, but their complexity means some bad actors can take advantage of them.
In summary, an annuity is a financial product that provides a fixed income stream in the future in return for a premium paid by an individual. Annuities can be used for various purposes and can be classified into different types. They can help supplement an existing retirement account and offer guaranteed income for the lifetime of the annuitant.
