An annuity is a payment stream bought with capital. A life annuity pays until you die (sometimes with a minimum period or spouse continuation). Other annuities pay for a fixed term only. Insurers price them using interest rates, expenses and life expectancy.
Key takeaways
- You trade liquidity and bequest potential for income certainty, especially with lifetime products.
- Quotes move with interest rates; timing can change the monthly amount for the same lump sum.
- Inflation linked options cost more up front but protect purchasing power.
- Read whether payments stop at death or continue to a beneficiary for a guaranteed period.