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Many individuals, especially those who are soon to retire, would like an investment that will guarantee them a regular income even after they have stopped working. For such investors, the question, what is annuity, always pops up. Annuity is an investment tool in which the investor enters into an agreement with an insurance company to purchase the annuity with the promise of being paid after an agreed period. The purchase could be made in one single payment or in a series of payments, and after that, withdrawals will be made depending on the agreement between the investor and the company.

Retirees like the prospect of guaranteed income after retirement, because they were already used to regular income before retirement. Guaranteed income annuity does not involve any investment risk or the possibility of loss of money due to the poor performance of stock or shares. The investor will always get the guaranteed amount of money over the years, without any interest growth or any decline due to the performance of the market.

The investor who would like to know what is annuity should be glad to know that a guaranteed income annuity is very safe as the income that they receive is assured, and the amount is the same at all times. There is no risk whatsoever, as the insurance company will be required to pay them the agreed amount regardless of what goes on in the money markets.

The investor who inquired what is annuity should also be advised that this type of annuity is not flexible at all, and the investor cannot make any changes to the agreement. The income that you and the insurance company agreed to at the time when you were signing the contract is the one that you will get for the agreed period, even if the markets improve drastically and a lot of money is gained on your investment.

This can be quite disadvantageous, and the investor could end up losing in the end, especially if there is a significant change in the market. However, they could gain if this significant change is negative, as they will still get the agreed income every time.

The investor inquiring what is annuity should therefore consider carefully before choosing such an annuity, and they should seek professional help before making such a decision. Guaranteed income annuity has a serious disadvantage, but it also has a serious advantage in that a retiree’s pension is converted into regular income, which they use just as they did before they retired. Therefore, the individual is guaranteed a salary for the rest of their life and this assures them financial safety in the end. It is also the best type of annuity for individuals who are not seeking any profits on their investment or who are not willing to take any risks with their money. Pension can easily be converted into a guaranteed income annuity and the investor will be able to enjoy the rest of their life after retirement without constantly monitoring the money markets and without any fear of loss or reduced income in later years.