Annuity
A contract, usually with an insurer, that converts a lump sum into a stream of guaranteed income.
An annuity is a contract — typically with an insurance company — in which you pay a lump sum or series of payments in exchange for income later, often for life. The appeal is longevity insurance: a guaranteed stream you can't outlive, which can cover essential expenses regardless of how long you live or how markets perform.
Annuities range from simple income annuities to complex products with riders and fees. The simple ones (single-premium immediate or deferred-income annuities) are easiest to understand and price; complex variable and indexed annuities can carry high fees and fine print. Whether an annuity fits depends on your other guaranteed income, like Social Security and pensions, and your tolerance for market risk.
This definition is general information to help you understand a term, not financial, tax, or legal advice. Figures that change year to year (limits, thresholds, rates) should be confirmed against current official sources. For guidance on your situation, a licensed fee-only fiduciary is the right next step.