What is "Annuity" meaning?

An annuity is a long-term financial product typically offered by insurance companies, where an individual makes a lump-sum payment or series of payments in return for regular disbursements, starting immediately or at a future date. It’s designed to provide a steady income stream, often used to fund retirement.

Example

“He invested part of his pension pot into an annuity to ensure a guaranteed monthly income for life.”

How is "Annuity" used in business?

In business and personal finance, annuities are used to manage long-term financial planning and risk. They are especially popular among retirees and financial advisors for ensuring predictable income. Businesses may also use annuities for employee benefit plans or executive compensation packages.

Pro Tip

Understand the type of annuity—fixed, variable, or indexed—and the fees involved, as these impact the returns and flexibility of the investment.

Related Terms

Pension, Retirement Planning, Fixed Income, Deferred Annuity