Definition
A contract where you pay a lump sum or regular payments in exchange for a steady income stream later. Often used for retirement income.
What to consider
- Compare APY across savings accounts to see which grows your money faster.
- Remember that compound interest can really boost your savings over time.
- Check how often the interest compounds to get the full picture.
Real world scenarios
- Andrea invests in a fixed annuity to receive a guaranteed payment during retirement. She likes the predictability it offers for covering essentials.
- Luis weighs the pros and cons of a variable annuity, aware that his payments may fluctuate with market performance. He decides a steady stream is more important than higher potential gains.
- When planning her retirement, Molly adds an annuity to her portfolio, supplementing her 401K and Social Security for greater financial security.
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