An annuity is a series of payments at a fixed interval guaranteed for a particular set of years or a lifetime for one or more individuals.
Similar to a pension, money is paid out of an insurance contract under which the annuitant pays a lump sum premium or multiple premium payments over a period of time. An annuity is guaranteed and backed by an insurance company. The amount paid back is a combination of your principal amount and interest earned , and part of the payments may be tax-free. Payments received from an annuity are similar to payments received from a pension. You can create your own guaranteed pension using different annuity planning strategies.