Annuity is derived from a Latin word -annus- which is a kind of investment medium that’s akin to the Certificate of Deposits that the banks offer.
Annuity can simply be referred to as income. Taking it deeper, annuity simply refers to a sum of money that is paid once a year during the life of the beneficiary. Lots of people don’t want to retire and not have money coming in, that’s the major reason why they buy annuities.
Don’t think life insurance and health insurance policy are the same thing as an annuity. You also can’t say that annuity is the same thing as a savings account; you also can’t say it’s the same as a savings certificate.
Annuities are bought for for long term financial goals, not short term. an annuity will continue to pay out as a pension, if that is your need. But if your intention is to not only build but also preserve your wealth for the future, then buy annuities. There are several kinds of annuities no doubt, but the types that are common to many people are the variable and the fixed types of annuities.
Don’t’ make the mistake of thinking that by the term “fixed” annuity it means “fixed interests” — far from it; what it actually means here is that the premium that you earn gets a guaranteed interest rate. Variable annuities, on the other hand, refer to premium that can go up or down, depending on market trends that one has no direct control on.
Anyone willing to buy annuities should ensure they get all the information that will help them before getting involved.
In conclusion, you can also talk to others that have bought annuities to know what to do and what not to do.
