Annuities

The term "annuity" refers to an insurance contract issued and distributed by financial institutions with the intention of paying out invested funds in a fixed income stream in the future.

Annuities are financial products that offer a guaranteed income stream, usually for retirees.

• The accumulation phase is the first stage of an annuity, whereby investors fund the product with either a lump sum or periodic payments.

• The annuitant begins receiving payments after the annuitization period for a fixed period or for the rest of their life.

• Annuities can be structured into different kinds of instruments, which gives investors flexibility.

• These products can be categorized into immediate and deferred annuities and may be structured as fixed or variable.

Immediate annuities are often purchased by people of any age who have received a large lump sum of money, such as a settlement or lottery win, and who prefer to exchange it for cash flows into the future. Deferred annuities are structured to grow on a tax-deferred basis and provide annuitants with guaranteed income that begins on a date they specify.