Annuities

An annuity is a life insurance product most often used as a vehicle to save for retirement or to guarantee a steady income for life. "Annuity" is a term that refers not to the product itself, but to a steady stream of payments for the rest of the purchaser's life. Annuities are unique among investment options because of the firm guarantee of income (a rarity in the financial world).

There are four kinds of annuities offered by life insurance companies: Immediate, Deferred, Fixed and Variable. Though each of these types is different, all require the customer to make deposits to the insurance company and then at some point begin withdrawing payments from the deposit. Deposits can be made either in a lump sum, or in increments over time. Exactly when the customer begins to receive annuity payments depends on the specifics of the contract and on the type of annuity purchased.

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