In the realm of financial planning and retirement strategies, annuities are often discussed as a means of providing steady income in one’s golden years. An annuity is a financial product that offers a stream of payments to an individual over a specified period or for the rest of their life. While annuities can serve as a reliable source of income, it’s essential to understand their purpose, benefits, and potential drawbacks before making any investment decisions. At its core, an annuity is a contract between an individual and an insurance company. The individual invests a sum of money, often referred to as the premium, into the annuity. In return, the insurance company promises to provide regular payments to the individual over a predetermined period. The payments can be structured in various ways, including fixed payments, variable payments tied to investment performance, or a combination of both. Uses of Annuities 1. Retirement Income One of the primary purposes of annuities is to provide a consistent income stream during retirement. An individual can use an annuity to supplement their Social Security benefits, pensions, and other retirement savings, ensuring