An annuity is a financial product that can provide individuals with a steady stream of income. It is typically purchased by someone who is planning for retirement, or who has recently retired, and is looking for a reliable source of income. In this post, we will discuss what annuities are, how they work, and why they can be beneficial for retirees.

Types of Annuities

Annuities come in two main types – fixed annuities and variable annuities. With fixed annuities, the investor agrees to pay a set amount over a specific period of time, such as 10 years. The insurer then agrees to pay out a set amount each year for the duration of the contract. This type of annuity provides the investor with a guaranteed payout regardless of how the market performs during that time frame.

Variable annuities are more complex than fixed annuities. They are investments that have some degree of risk associated with them because they depend on the performance of underlying investments such as stocks and bonds. Investors can choose from different funds within their variable annuity in order to diversify their portfolio and reduce their risk exposure.

Annuities are an attractive way for those seeking a secure retirement income to hedge against the risks of living longer than their money. If you don’t anticipate needing liquid funds in the near future, annuity holders can make sure that they have enough money to last them through all stages of life – no matter how long!

An annuity can provide retirees with a steady stream of income for life after retirement age has been reached. There are two main types – fixed and variable – each offering different levels of security and risk depending on one’s personal goals and needs. Understanding how an annuity works can help individuals make informed decisions when deciding if this product is right for them.

Source: Investopedia

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