Retirement annuity (RA) is a financial product sold by insurance companies and is designed to provide regular income. They work on the principle that you make a lump sum contribution or a series of contributions, and in exchange you receive guaranteed payments over a specified period of time or for the rest of your life.
Retirement annuities provide regular payments, which helps retirees plan their expenses and avoid the risk of running out of money.
RA protects against market risk and longevity risk (when a person lives longer than expected and may exhaust their savings).
Some annuities, such as indexed annuities, help protect against inflation by tying payments to an index.
Annuity may offer tax advantages, such as tax deferment on earnings until earned.
Annuities can be structured to provide benefits to heirs upon the annuity owner’s death.
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