An annuity is a financial product designed to provide a steady stream of income over a specific period, often during retirement. It is typically purchased through an insurance company and funded with either a lump sum or periodic payments.

There are 2 options for annuities:

1. Immediate Annuity: With an immediate annuity, you make a lump-sum payment to the insurance company and begin receiving income payments immediately, typically within a month. This option is suitable for those who need immediate income. However, here are the disadvantages:

   • No Access to Principal: Once you purchase an immediate annuity and start receiving payments, you typically cannot access the principal amount you invested. This lack of liquidity may not be suitable for individuals who need access to their funds.

   • Inflation Risk: Immediate annuity payments remain fixed over time, which means they may lose purchasing power due to inflation. This can erode the value of your income over the long term.

   • Loss of Control: When you buy an immediate annuity, you give up control of your lump-sum payment in exchange for guaranteed income. This loss of control may not appeal to individuals who prefer to manage their investments themselves.

2. Deferred Annuity: Deferred annuities allow you to accumulate funds over time before starting to receive income payments. By deferring withdrawals, you can take advantage of tax-deferred growth opportunities and build a more substantial nest egg for your future financial needs.

Each type of annuity has its pros and cons, and the right choice depends on your individual financial goals, risk tolerance, and retirement timeline. It's essential to carefully consider your options and consult with a financial advisor before purchasing an annuity.