Retirement & Savings

What Is an Annuity?

An annuity is a contract, usually with an insurance company, in which a person pays a lump sum or series of payments in exchange for regular income, either starting right away or at a later date. Annuities can provide payments for a set period or for life, depending on the contract.

Main Types

Immediate annuities begin paying soon after purchase; deferred annuities build value first. Fixed annuities pay a set rate, variable annuities depend on investment performance, and indexed annuities are linked to a market index with limits.

Costs and Terms

Contracts can include fees, surrender charges for early withdrawal, and optional riders; the details are set out in the contract.

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Last updated: September 27, 2026. This definition is for general educational purposes only. It is not financial, investment, tax, legal, or medical advice, and it does not recommend any product or course of action. For decisions about your own situation, consult a qualified professional.