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Annuities are contracts issued and distributed (or sold) by financial institutions where the funds are invested with the goal of paying out a fixed income stream later on. They are mainly used for retirement purposes and help individuals address the risk of outliving their savings. Upon annuitization, the holding institution will issue a stream of payments at a later point in time.

• Annuities are financial products that offer a guaranteed income stream, used primarily by retirees.
• Annuities exist first in an accumulation phase, whereby investors fund the product with either a lump-sum or periodic payments.
• Once the annuitization phase has been reached, the product begins paying out to the annuitant for either a fixed period or for the annuitant's remaining lifetime.
• Annuities can be structured into different kinds of instruments—fixed, variable, immediate, and deferred income—which gives investors flexibility.