What is a annuity?

An annuity is a financial product offered by insurance companies that provides a stream of income for retirees. It is essentially a contract between an individual and an insurance company. The individual makes either a lump sum payment or regular contributions over time, called premiums, into the annuity. In return, the insurance company agrees to make regular payments to the individual, either immediately or at a specified future date. Annuities are often used as a retirement planning tool, as they can provide a reliable income stream during retirement years. They offer tax advantages and can be customized to suit individual needs. Annuity options include fixed annuities, which offer a guaranteed fixed interest rate, and variable annuities, where the returns are based on the performance of underlying investment options.