Annuity

An annuity is a financial product that provides a fixed or variable stream of payments to an individual over a specified period, usually during retirement. An annuity can be purchased through an insurance company or investment firm and is usually funded by a lump-sum payment or a series of payments.

Fixed Annual Payment

One type of annuity is a fixed annuity, which provides a fixed annual payment to the policyholder for a specified period. This payment is usually guaranteed by the insurance company and continues only during the lifetime of the named beneficiary.

Beneficiary

The beneficiary is the person who receives the payments from the annuity. In the case of a fixed annuity, the named beneficiary receives a fixed annual payment for the specified period, usually until they die.

Advantages

Fixed annuities are popular because they provide a predictable stream of income that can help individuals plan for retirement. They also offer tax-deferred growth, meaning that the earnings on the annuity are not taxed until they are withdrawn.

Disadvantages

One disadvantage of a fixed annuity is that the payments are fixed, meaning that they do not adjust for inflation. This can be a problem if inflation rises, as the purchasing power of the annuity payments will decrease over time.

Conclusion

In summary, a fixed annuity is a financial product that provides a fixed annual payment to the named beneficiary for a specified period, usually during retirement. While fixed annuities offer a predictable stream of income, they may not adjust for inflation, which can be a disadvantage over the long term.