An Annuity is a financial product that provides regular income payments to an individual, usually after retirement, in exchange for a lump-sum investment or periodic contributions.
An annuity is commonly used for retirement planning to ensure a steady and predictable income for a specific period or for life. Annuities are usually offered by insurance companies and can start paying income either immediately or at a future date.
There are different types of annuities based on payment structure and duration, such as immediate annuity, deferred annuity, fixed annuity, and variable annuity. The income amount depends on factors like investment amount, age of the investor, chosen payout option, and prevailing interest rates.
Annuities help reduce the risk of outliving savings by providing guaranteed income. However, they may offer limited liquidity and returns compared to market-linked investments, so they are best suited for investors seeking income stability and financial security.
"A retiree invests ₹10 lakh in an immediate annuity plan and receives ₹8,000 per month as regular income for life."