WHAT IS AN ANNUITY?
According to dictionary, annuity is a fixed sum of money paid to someone each year, typically for the rest of their life.
For example: Mithun left his an annuity of £2,0000 in his will.
An annuity is a powerful financial planning tool that when used for the right purpose, and in the right situation, can provide tremendous value to the annuity buyer. Annuities can add stability and security to an investor’s portfolio when they are used in an efficient manner. Unfortunately, the vast majority of annuity buyers misallocate their resources when purchasing annuities and end up with an underperforming annuity that costs too much, pays too little, and is simply an inefficient use of their resources.
By definition, an annuity is a contract between you and a 3rd party (usually an insurance company) whereby in exchange for making a lump sum payment, the insurance company promises to do four things:
- Provide an income for a certain period of time,or for life
- Provide for accumulation, or asset growth
- Provide a death benefit
- Provide for long term care benefits
Hope you are clear now.