Annuities are financial instruments that provide a regular income at retirement. When you reach retirement age, the money you have contributed to your annuity account will provide you regular income payments throughout your retirement. Sometimes these payments are indexed to increase with inflation
There are generally two types of annuities – lifetime annuities, which will pay you a regular income until your death, and fixed term annuities, which will pay you a regular income for a defined period of time after you retire.
Annuities are useful as they give you certainty about your income. But be careful to read the fine print. In some cases, if you die earlier than you expect to, your beneficiaries will only receive a portion of your annuity. But other types of annuity products allow the funds you have left over in your annuity account to be credited as a lump sum or regular payment to your beneficiaries.