What is an annuity?

An annuity is fundamentally a financial product designed to provide a series of payments at equal intervals, typically over a specified period. This feature allows individuals, particularly those in retirement, to receive a predictable stream of income, which can be crucial for managing living expenses. Annuities can be structured in various ways, such as immediate or deferred, and can be either fixed or variable in terms of payment amounts.

This characteristic of providing consistent payments makes annuities particularly appealing for individuals seeking to ensure financial stability over time. They can be funded through a lump-sum payment or through a set series of contributions, which will then yield periodic payments to the annuitant, either for a specified term or for the duration of the annuitant's life, depending on the type of annuity.

While other options may represent various financial concepts, they do not encapsulate the essence of an annuity. For instance, insurance policies that pay upon death serve a different purpose related to life coverage, and investments that incur no guarantees do not align with the security and structured payment features that annuities offer. Similarly, real estate investments focus on asset appreciation and income generation from properties rather than structured payment features. Thus, the definition of annuity as a product providing