What is a key feature of both immediate and deferred annuities?

Immediate and deferred annuities both serve as investment products designed to provide a stream of income, generally during retirement. These annuities allow individuals to accumulate funds over time (in the case of deferred annuities) or to convert a lump sum into a regular income payment right away (in the case of immediate annuities). By pooling together funds from multiple investors, annuities can offer a stable income, which is a key aspect of their use as financial planning tools, especially for retirement.

When individuals purchase an annuity, they essentially enter a contract with an insurance company, which then manages the investments and payouts as per the terms of the annuity. This focus on investment confirms the categorization of both immediate and deferred annuities as investment products rather than simply insurance products or necessitating a death benefit, which relate specifically to life insurance. The nature of an annuity focuses on providing financial growth or income rather than simply covering death-related expenses.