What is an annuity?

[charlie]

I often hear the term annuity in financial planning, but I’m not completely sure what it means. What exactly is an annuity, how does it work, and in what situations do people use it? Also, are there different types of annuities that offer different benefits?

 

[Sophie]

An annuity is a financial product that makes periodic payments such as monthly or annually in exchange of an initial investment that is often used when it comes to retirement income or long term financial planning.

 

[kebido]

An annuity is a financial contract with an insurance company that provides a guaranteed income stream, typically during retirement. You fund the contract with a lump sum or a series of payments, and in return, the company agrees to pay you a steady stream of income for a set period or for the rest of your life. Annuities are a popular retirement planning tool because they can help secure your financial future against market fluctuations.