What is annuity?

An annuity is a type of financial product or investment wherein payments are made in regular intervals at predetermined amounts over a set period of time. Annuities can provide the investor with an income stream, as well as potential tax benefits and other advantages that come with investing in an annuity.

Types of Annuity

Immediate annuities begin paying out right away while deferred annuities have a waiting period before they start generating income (although some may offer cash values during the deferral period).

Fixed annuities are products that pay out pre-set amounts each month regardless of changes in interest rates or market performance; these contracts will not adjust their payment amount regardless of the performance of their underlying investments.

Variable annuities provide more flexibility since they allow investors to choose from several different subaccounts (similar to mutual funds) and the payments fluctuate based on how those accounts perform.

Benefit of Annuity

The primary benefit of purchasing an annuity is that it provides income security for future years; if structured properly this income stream can last for life or at least for the length of your retirement even if markets take a turn for the worse. Annuities also offer less volatility than most other traditional investments since they don’t involve stock trading and usually guarantee certain levels of return regardless of market conditions.

Additionally, depending on how it's structured, an annuity may provide tax benefits when it comes to paying taxes on the payments that you receive from the insurer.

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