An annuity is a series of payments. For example, a monthly payment of $1,000 for the next 120 months is a 10-year monthly annuity. Annuities are frequently used in retirement planning because of tax advantages that they offer. Insurance companies sell annuity contracts. A fixed annuity pays a constant amount. A variable annuity pays a variable amount that fluctuates with the investment performance of the underlying investments. Those underlying investments are called subaccounts or portfolios.
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