Annuity

An annuity is a contract between you and an insurance company in which you make a lump-sum payment or series of payments and, in return, receive regular disbursements, beginning either immediately or at some point in the future. The income you receive from an annuity is taxed at regular income tax rates, not capital gains rates, which are usually low

The goal of annuity is to provide a steady stream of income, typically during retirement. Funds accrue on a tax-deferred basis, and like 401(k) contributions, can only be withdrawn without penalty after age 59Ā½.