annuity

an·nu·i·ty   (ə-nōō'ĭ-tē, ə-nyōō'-)    n.   pl. an·nu·i·ties The annual payment of an allowance or income. The right to receive this payment or the obligation to make this payment. A contract or agreement by which one receives fixed payments on an investment for a lifetime or for a specified number of years. [Middle English annuite, from Anglo-Norman, from Medieval Latin annuitās, from Latin annuus, yearly, from annus, year; see at- in Indo-European roots.]

Annuity

A series of fixed payments paid at regular intervals over the specified period of the annuity. The fixed payments are received after a period of investments that are made into the annuity.

Investopedia Commentary

An annuity is essentially a level stream of cash flows for a fixed period of time. It is most often used as a form of income during retirement.

Related Links

Anything But Ordinary: Calculating The Present And Future Value Of Annuities
Getting the Whole Story on Variable Annuities
Passing the Buck: The Hidden Costs of Annuities
20 Investments You Should Know

See also: Annuitization Method, Deferred Annuity, Payout Phase, Perpetuity, Segregated Fund, Variable Annuity

annuity

A stream of equal payments to an individual, such as to a retiree, that occur at predetermined intervals (that is, monthly or annually). The payments may continue for a fixed period or for a contingent period, such as for the recipient's lifetime. Although annuities are most often associated with insurance companies and retirement programs, the payment of interest to a bondholder is also an example of an annuity. See also annuity certain, contingent annuity, deferred annuity, fixed annuity, joint and survivor annuity, refund annuity, straight life annuity, tax-sheltered annuity, variable annuity.

Main Entry: an·nu·ity
Pronunciation: &-'nü-&-tE, -'nyü-
Function: noun
Inflected Form: plural -ities
Etymology: Medieval Latin annuitas, from Latin annuus yearly
1 : an amount payable at regular intervals (as yearly or quarterly) for a certain or uncertain period
2 : the grant of or the right to receive an annuity annuities for several old friends>
3 : a contract (as with an insurance company) under which one or more persons receive annuities in return for prior fixed payments made by themselves or another (as an employer)

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annuity cer·tain
; plural annuities certain
: an annuity payable over a specified period even if the annuitant dies

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annuity due
; plural annuities due
: an immediate annuity in which the payment of the benefits is made at the beginning of each payment interval rather than at the end

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contingent annuity
: an annuity whose starting or ending date depends on the occurrence of an event (as the death of the annuitant) whose date is uncertain

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con·ven·tion·al annuity
: an annuity under which the annuitant receives a specified minimum amount at each payment —compare VARIABLE ANNUITY in this entry

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deferred annuity
: an annuity in which payment of benefits is delayed until a particular time (as at retirement) —compare IMMEDIATE ANNUITY in this entry

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group annuity
: a pension plan paying annuity benefits at retirement for all eligible persons under a single master contract usually issued to an employer for the benefit of its employees

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im·me·di·ate annuity
: an annuity purchased with a single premium in which payment of benefits begins within the first payment interval (as within a year) —compare DEFERRED ANNUITY in this entry

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joint–and–survivor annuity
: an annuity payable as long as any of the two or more annuitants remains alive called also joint-and-last-survivor annuity joint and survivorship annuity joint life and survivorship annuity —compare JOINT LIFE ANNUITY in this entry

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joint life annuity
: an annuity payable only until the death of any of the annuitants called also joint annuity —compare JOINT-AND-SURVIVOR ANNUITY in this entry

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life annuity
: an annuity payable during the annuitant's lifetime and terminating at death called also straight life annuity

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life income–pe·ri·od cer·tain annuity
: an annuity that guarantees a minimum number of payments even if the annuitant dies before the minimum amount is paid or a minimum number of payments plus income for life if the annuitant is still alive after the minimum amount is paid

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refund annuity
: an annuity in which payments to the annuitant or to the annuitant's estate or to a beneficiary are guaranteed to equal at least the amount of the premium paid for the annuity

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straight life annuity
: LIFE ANNUITY in this entry

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var·i·able annuity
/'ver-E-&-b&l-/
: an annuity that is backed primarily by a fund of common stocks and whose payments go up or down depending on how well the stocks perform —compare CONVENTIONAL ANNUITY in this entry variable life insurance at LIFE INSURANCE