Quick Definition

An annuity is a financial product that pays out a fixed stream of payments to an individual, primarily used as an income stream for retirees.

Examples

• 1A retiree purchases an immediate annuity with a lump sum to receive a guaranteed monthly payment for life.
• 2An individual invests in a deferred annuity during their working years to accumulate savings that will later be converted into periodic payments upon retirement.
• 3A variable annuity where payments vary based on the performance of the investment options chosen by the annuitant.
• 4An indexed annuity that provides returns based on a specified equity-based index.

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