Annuities

Annuities are financial products designed to provide a stream of income to an individual, typically during retirement. These contracts, sold by insurance companies, involve an upfront payment or a series of payments in exchange for guaranteed periodic payments, usually for a specified period or for the remainder of the annuitant's life. The income stream can be fixed or variable, depending on the type of annuity selected, offering varying degrees of risk and potential returns. They are often used to supplement other retirement savings and provide a predictable income source.

Annuities meaning with examples

• After retiring, John purchased an annuity to guarantee a monthly income, supplementing his Social Security benefits and providing financial stability throughout his golden years. This allowed him to pursue his hobbies and travel without worrying about running out of money, making his retirement more comfortable.
• Sarah's financial advisor suggested investing a portion of her inheritance into an annuity to ensure she received a consistent income stream for the rest of her life. This helped to mitigate the risk of outliving her savings and gave her peace of mind regarding her long-term financial security and freedom.
• The company offered its employees a deferred annuity as part of its retirement plan, allowing them to accumulate savings tax-deferred and receive regular payments later. This encouraged employee retention and provided a valuable benefit, helping them to save effectively for retirement.
• Many people use immediate annuities to convert a lump sum of money, such as lottery winnings or the proceeds from the sale of a business, into a steady income stream. This offers a sense of financial security and allows for planning for a comfortable living, protecting assets from potential future market fluctuations.