Home
/
HR Glossary
/
Annuity

Annuity

Updated on:
August 23, 2022

Hello

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Suspendisse varius enim in eros elementum tristique. Duis cursus, mi quis viverra ornare, eros dolor interdum nulla, ut commodo diam libero vitae erat. Aenean faucibus nibh et justo cursus id rutrum lorem imperdiet. Nunc ut sem vitae risus tristique posuere.

green check mark symbol
Fact Checked

Content is reviewed to provide accurate, clear, and reliable information. Learn about our editorial process

Table of Content

What is Annuity?

An annuity is a contract created by an annuity issuer such as an insurance company. The insurance company agrees to make a series of payments to the annuitant (the person receiving the payments), in exchange for a series of premium payments. The payments may be paid at regular intervals (such as monthly, quarterly, or annual payments).

Annuities are a type of insurance that can provide you with a stream of income during retirement. They can be an important part of your retirement planning, as they can provide you with a source of income that you can't outlive.

Annuities can be used to help you meet a variety of retirement income needs, including:

• providing a source of income that you can't outlive

• supplementing other sources of retirement income, such as Social Security

• helping to preserve your wealth

• providing tax-deferred growth potential

There are a variety of annuity types, and each has its own features and benefits. 

Choosing Whether to Offer Qualified Employee Annuities :

Although annuities offer a guaranteed stream of retirement income, not many organizations offer annuities as a traditional investment option.

This is typical because there are hurdles and complexities employers face with annuities, such as: 

  • Finding an annuity provider that will be around for the long haul. That way, the provider can pay an employee over the course of their life.  
  • Finding a provider that offers substantial liability protection. 
  • Managing costs involved factors like moving participants’ investments from one employer to another. This generally entails fees that differ across providers/plans. 

While some employers do offer annuities as a central part of their retirement plans (they automatically enroll new employees unless they choose to opt-out), the majority are not yet ready to offer annuities to their employees.