Retirement planning often requires a paycheck that cannot be outlived. An annuity is a contract that converts a lump sum or series of premiums into a stream of periodic payments, typically for life or a fixed number of years. Insurers use mortality and interest assumptions to price the promise.

Immediate annuities begin payments soon after purchase; deferred annuities accumulate value before the payout phase. Fixed annuities credit a guaranteed rate; variable annuities link returns to investment options chosen by the owner. Riders can add inflation protection or death benefits.

Annuities shift longevity risk from the individual to the insurer. They are widely used in pension buy-outs and personal retirement portfolios. Tax treatment and surrender charges vary by product and jurisdiction, so the contract details repay careful reading before purchase.

• Contract providing periodic income payments
• Can be immediate or deferred, fixed or variable
• Transfers longevity risk to the insurer
• Common in retirement and pension planning