Money that people receive regularly once they are retired is an example of an annuity.
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.
Origin of annuity
- Middle English annuite from Anglo-Norman from Medieval Latin annuitās from Latin annuus yearly from annus year at- in Indo-European roots
From American Heritage Dictionary of the English Language, 5th Edition