An annuity is a contract between you and an insurance company that’s designed to provide a steady stream of income during retirement. You can fund an annuity with a single lump-sum payment or periodic payments over time.
In exchange for your contributions, the annuity company makes regular income payments to you over time. You can choose when you want the payments to begin and how long they should last—either a set number of years, like a 10-year payment period, or guaranteed payments for the rest of your life.
Different terms and costs are involved with varying payout periods, depending on the type of annuity you choose:
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