What does an annuity allow individuals to do concerning their retirement income?

An annuity is specifically designed to provide individuals with a predictable and steady income stream over a period, typically during retirement. This is one of its primary functions and a central benefit of purchasing an annuity. By investing in an annuity, individuals can convert a lump sum of money—often from savings or retirement accounts—into regular payments that can serve as a reliable source of income. This makes it easier for retirees to manage their finances and meet ongoing expenses.

A steady income stream provides financial security, allowing individuals to plan their budgets without the concern of fluctuations that can come from other forms of investment income. Such a feature is particularly valuable as it can help to alleviate the risk of outliving one's savings in retirement.