What is a annuity?

An annuity is a financial product that is designed to provide a steady income stream, typically during retirement. An annuity can be purchased through an insurance company or a financial institution, and it involves a contract between the annuity holder and the issuer. In essence, an individual pays a lump sum or makes a series of payments over time, and in return, the annuity provider agrees to make regular payments back to the individual, either immediately or at some point in the future. There are various types of annuities, including fixed, variable, and indexed annuities. Fixed annuities offer a guaranteed payout, while variable annuities allow the individual to invest in various financial options, potentially increasing the payout based on investment performance. Indexed annuities are linked to a stock market index but usually include some level of protection against loss. Annuities can be an essential part of a retirement strategy, helping ensure that individuals have a reliable income when they cease working. The specifics of annuities can vary significantly based on the terms of the contract, so it is advisable for individuals to carefully consider their options. For more detailed information about specific annuity products and features, individuals may refer to Prudential's website or relevant resources.