Annuity

An annuity is a financial contract — typically issued by an insurance company — that provides a series of payments over time, either for a set period or for the lifetime of the annuitant. Annuities are primarily retirement income tools, not life insurance policies, but they are sold by many of the same carriers and agents. During the accumulation phase, funds grow on a tax-deferred basis. In the distribution phase, the annuity pays out income. Types include fixed (guaranteed interest), variable (market-linked), and fixed-indexed (linked to an index with downside protection). Annuities carry fees and surrender charges that vary by product and carrier.