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What is an annuity?

An annuity is a contract issued by financial institutions. Investors give a lump sum or regular payments to the institution in return for guaranteed, steady income during retirement.

Annuities are primarily used as an insurance to retirement savings and are used during the early phase of accumulation. Investors can either fund an annuity lump-sum or through periodic payments or choose the terms and conditions for different kinds of payouts from financial institutions.

Different types of annuities include fixed, variable, immediate, and deferred income.