An annuity is a contract, usually with an insurance company, that turns money you pay in into a series of payments. Those payments can last for a set number of years or for life. People buy them for retirement income. A 401(k) or an IRA is an account that holds investments. An annuity is the product that converts a sum into scheduled income.

Related Lessons

• Click Here for our lesson on The Secret to a Comfortable Retirement
• Click Here for our lesson on Is an Annuity Right for You?
• Click Here for our lesson on Understanding 401(k) Plans
• Click Here for our lesson on Understanding Individual Retirement Arrangements (IRA)