Annuities are financial products that provide a steady stream of income over a specified period of time, typically during retirement. They are often used as a tool for financial planning to ensure a secure retirement.

Annuities work by allowing individuals to make a lump-sum payment or a series of payments to an insurance company. In return, the insurance company guarantees a regular stream of income that can be paid out for a specific period of time or for the rest of the individual’s life.

There are several types of annuities, including fixed annuities, variable annuities, indexed annuities, and immediate annuities. Each type has its own features and benefits, so it’s important to understand the differences before choosing one.

Annuities offer several benefits as a financial planning tool. They provide a predictable and guaranteed stream of income, which can help individuals maintain their standard of living during retirement. Annuities also offer tax-deferred growth and can be customized to meet individual needs and goals.

While annuities have their benefits, there are also potential drawbacks to consider. They can be complex financial products, and fees and expenses associated with annuities can be high. Annuities also lack liquidity, meaning it can be difficult to access the funds without incurring penalties or surrender charges.