- The definition of an annuity is a sum of money or an investment that is paid at regular intervals.There are two main types of annuities:
- Fixed rate annuities - The primary goal of the fixed rate annuity is to save money for the long term. You will make monthly payments of premiums into the annuity and upon a specified date of maturation or when you are ready you can withdraw your funds.With a fixed rate annuity, you are guaranteed a certain payout amount based on the rate that was available or agreed upon at the time you purchased your annuity. Many people that are looking for a way to invest their money that offers little to moderate risk prefer the fixed rate annuity.
- Variable rate annuities - Variable rate annuities differ from the fixed rate varieties because there is not a determined rate at which you will compensated. The rate of return fluctuates with the market. Variable rate annuities are sometimes marketed to people that are capable of handling a higher level of risk.
Money that people receive regularly once they are retired is an example of an annuity.
- a payment of a fixed sum of money at regular intervals of time, esp. yearly
- an investment yielding periodic payments during the annuitant's lifetime, for a stated number of years, or in perpetuity
Origin of annuityMiddle English and amp; Old French annuite ; from Medieval Latin annuitas ; from Classical Latin annuus, annual ; from annus: see annual
- a. The annual payment of an allowance or income.b. The right to receive this payment or the obligation to make this payment.
- A contract or agreement by which one receives fixed payments on an investment for a lifetime or for a specified number of years.
Origin of annuityMiddle English annuite, from Anglo-Norman, from Medieval Latin annuitās, from Latin annuus, yearly, from annus, year; see at- in Indo-European roots.
- A specified income payable at stated intervals for a fixed or a contingent period, often for the recipient’s life, in consideration of a stipulated premium paid either in prior installment payments or in a single payment. For example, a retirement annuity paid to a public officer following his or her retirement.
- The right to receive such an income.
- The duty to make such a payment or payments.
annuity - Investment & Finance Definition
A financial instrument that pays out the investor’s earnings on a regular, periodic basis for a set amount of time. Annuities typically are used to provide funds for retirement. Annuities may be paid for the duration of a person’s life or may be set for a certain period of time. Annuities are tax-deferred, so the earnings from investments in these accounts grow without tax liability until the benefits are paid out.