A contract providing historically reliable income for life or a fixed period, issued by insurers.
An annuity is a financial contract issued by an insurance company that provides historically reliable income for a set period or for life. You pay a lump sum or make regular payments; in return, the company pays you regular income (monthly, quarterly, or annually). Types include: fixed annuities (historically reliable payments), variable annuities (payments vary with investments), and indexed annuities (payments tied to market indexes). Annuities provide income certainty and can include death benefits, making them attractive for retirees. However, annuities come with fees, surrender charges, and complexity; some have poor returns. Understanding the fine print is essential before purchasing.