Definition: What are Annuities?

An annuity is a product that pays you a certain amount of income at predetermined dates.

This is an investment product often utilized by people who are planning retirement. Once you've stopped working, it is often very helpful to have a reliable income stream coming to you from your investments.


Annuities are one way to receive this cash flow.

Additional Details – What are Annuities?

Annuities can be customized to many individual situations. There are both fixed and variable annuities, and which one you opt to invest in will affect how you're paid.

In a fixed annuity, there is a minimum threshold that you will always be paid. If you invest in a variable annuity, the performance of your investments will determine how much cash flow you receive.


Payment Schedule

The other element of customization comes from the payment schedule.

You can structure your annuity payouts in a number of different ways. Some opt for a monthly payout, closely representing the typical method of a monthly paycheck, as some are more comfortable managing their income and finances this way.

Others instead opt for a bi-monthly, quarterly or yearly payout. A financial manager dealing in annuities can structure them in the way that works best for your retirement plans and your preferred money management style.