What is Annuity?

In Canada, an annuity is a financial product offered by insurance companies designed to provide individuals with a stable retirement income. The purchaser makes a lump-sum or periodic payment to the insurance company, which then guarantees fixed payments monthly or annually over a specific period—typically for life or a fixed term. Below are its key features and types.

Features

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• Stable Income: Annuities provide retirees with a reliable cash flow, reducing exposure to market fluctuations.

• Flexibility: Options include lifetime payments, fixed-term annuities, or joint annuities shared with a spouse.

Types of Annuities

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• Fixed Annuity: Provides regular fixed payments, ideal for risk-averse individuals.

• Variable Annuity: Payments fluctuate based on investment performance, suitable for those seeking growth.

• Deferred Annuity: Funds accumulate first, with payments beginning at a later date.

• Immediate Annuity: Payments start immediately, ideal for those needing income right away.