A distribution of money that is earned on an investment on a set schedule such as quarterly, biannually, or annually is known as an annuity. Typically, an annuity is used as part of a retirement plan. Once the annuitant, or recipient, stops working, an annuity ensures a fixed and stable income. An annuity may be designed such that it provides income for two.
Retirement Pension – A form of Annuity
Retirement pension is a common form of annuity. At the time when the retiree was working, he or she paid into a pension fund which was invested. After the job is over and the person is retired, the return on the investment is transformed into an annuity which is distributed to the retiree.
How does Annuity works?
The annuitant has the choice to either invest in installments, or purchase an annuity having a lump sum. Annuity is not like life insurance, as it does not require a physical examination. Rather than rather funding surviving children or partners, annuity is used to fund the individual during his or her lifetime, except in certain situations .
