What Is Annuity?

Annuity is a type of savings account in which a lump sum amount is paid to the beneficiary on a regular basis. This is an investment plan where the investor contributes an amount and gets a regular payment from the company on a fixed date. The annuity is also known as ‘fixed income’. It can be used for various purposes such as retirement, education, medical expenses, etc.

Annuity is one of the best investment options for people who are looking for regular income after their retirement. It is a long term investment option, which gives a fixed income to the investor. So, if you are planning to start your retirement with annuity, then you need to know what is annuity and how to use it.

Annuity in simple terms

Annuity is an investment plan, where you will contribute a certain amount on a regular basis and get a fixed amount from the company on a fixed date. There are different types of annuities which will give you different benefits. Let us have a look at some of the common types of annuity.

Fixed annuity: In this annuity you will get a fixed amount of money at the end of the tenure. For example, if you invest Rs. 1,000 for 10 years and get Rs. 100 as a monthly income, then it is called a fixed annuity.

Variable annuity: This is the most popular type of annuity. You will get a monthly income for a certain period of time, but after that it will be increased or decreased based on the performance of the stock market.

Deferred annuity: This is the type of annuity where you will get an initial lump sum amount and you can decide how much you want to withdraw from your account. This is the best option for those people who are looking for a tax-free investment option.