An annuity is a financial product offered by insurance companies
Annuities provide a steady stream of income over a specified period of time, typically during retirement. It is designed to help individuals accumulate savings and then distribute those savings as a guaranteed income stream during retirement years.
In essence, when you purchase an annuity, you’re making a contract with the insurance company.
You make either a lump-sum payment or a series of payments into the annuity, and in return, the insurance company agrees to make periodic payments to you, either immediately or at a later date.
Annuities come in various forms, but they can generally be categorized into two main types: fixed annuities and variable annuities. Fixed annuities offer a guaranteed interest rate for a specified period, providing a predictable income stream. Variable annuities, on the other hand, allow you to invest your contributions in a range of investment options, with the potential for higher returns but also greater risk.
Overall, annuities can be an important tool in retirement planning, offering tax-deferred growth, a reliable income stream, and the potential for financial security in retirement.
