Annuity refers to a contract or agreement that financial institutions create and distribute with the goal of paying out invested funds in a fixed income stream in the future. Annuities are purchased or invested using monthly premiums or lump-sum payments. The holding institution creates a future stream of payments for a set amount of time or for the rest of the annuitant’s life. Annuities are mostly utilized for retirement planning and to mitigate the danger of outliving one’s resources.
The basic idea behind annuities is to provide some kind of cash flow in the retirement years and to remove concerns about people outliving their assets. Since these investments are sometimes not enough for their lives, some investors can opt to choose an annuity from financial institutions or insurance companies.
As a result, these types of things are suited for annuitants or investors who want stable and guaranteed retirement savings.