An annuity is a financial product that provides steady income during retirement. It is a contract between an insurer and an annuitant, whereby the insurer agrees to make a series of payments in exchange for a lump-sum premium payment or a series of periodic premium payments. Annuities are designed to help people protect their retirement savings and ensure income for the duration of their retirement years.

Annuity payments typically exceed what you would receive from other investments and savings products, as the money left in the annuity is protected against inflation and investment risk. This means that annuities can provide an excellent source of financial stability during retirement.

When an annuitant purchases an annuity, they have the option to choose from different annuity types. Most commonly, annuitants will select from two main types of annuities, immediate or deferred. Immediate annuities begin paying income shortly after purchase and provide a significant lump-sum payment in exchange for periodic premium payments. Deferred annuities accumulate value over time, and then pay out income in either a lump-sum or in a series of payments after a certain period has elapsed.

Annuity owners also have the option to select from various income payout options. With lifecycle options, the insurer can adjust the amount of payments to match changing needs or life events. Other payment options include fixed and variable annuities, which are set to pay out a set amount or an amount determined by market performance, respectively.

Owners of annuities must also consider the fees and taxes associated with the product. Annuities come with an annual fee and surrender charge, depending on the terms of your contract. Additionally, annuities are subject to federal and state taxes depending on the type of annuity purchased. However, the tax deferral associated with annuities can help in minimizing your tax bill during retirement.

Overall, annuities are a great way to secure lifetime income during retirement. If you are looking for a financial product that can provide reliable income many years after you retire, annuities may be an ideal solution for you. Be sure to seek the help of an experienced financial advisor when selecting an annuity to ensure it meets all of your needs.