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Finance Dictionary and Glossary of Investment Terms
A series of fixed-amount payments paid at regular intervals over the specified period of the annuity.
A regular periodic payment made by an insurance company to a policyholder for a specified period of time.
A contract between you and an insurance company where you pay the insurer a specified amount and, in return, receive regular payments either for life or for a stated period of time. The money grows on a tax-deferred basis until you begin receiving it, usually after age 59 1/2. At that point, you can continue to postpone the tax bite by ""annuitizing"" the money -- in other words, converting the assets into a monthly stream of income.There are two basic types of annuities: fixed and variable. If you choose a fixed annuity, the premiums you pay will be invested in fixed-rate instruments such as bonds or mortgages.A variable annuity works more like a tax-deferred mutual fund. Your premiums could be invested in a variety of items, ranging from individual stocks and mutual funds to real estate and certificates of deposit. Thus, your return will vary depending on the success of the portfolio.