An annuity is an insurance product that pays out income, and can be
used as part of a retirement strategy. Annuities are a popular choice
for investors who want to receive a steady income stream in retirement.
Here's
how an annuity works: you make an investment in the annuity, and it
then makes payments to you on a future date or series of dates. The
income you receive from an annuity can be doled out monthly, quarterly,
annually or even in a lump sum payment.
The size of your payments are determined by a variety of factors, including the length of your payment period.
You
can opt to receive payments for the rest of your life, or for a set
number of years. How much you receive depends on whether you opt for a
guaranteed payout, fixed annuity, or a payout stream determined by the performance of your annuity's underlying investments, variable annuity.