What is an annuity primarily used for?

An annuity is primarily used to provide a steady income stream during retirement. This financial product is designed specifically to help individuals accumulate funds during their working years and convert those funds into regular income payments when they retire. The primary purpose of an annuity is to ensure that retirees have a predictable source of income that can support their living expenses throughout retirement, often for the rest of their lives.

Annuities come in various forms, including fixed, variable, and indexed, each catering to different financial needs and risk tolerances. The main appeal lies in their ability to offer lifetime income, which can alleviate the fear of outliving one's savings, a significant concern for many individuals approaching retirement. In summary, the key function of an annuity is to provide financial security and peace of mind during retirement by supplying a regular payment stream.