What Is an Annuity Payout?

An annuity is a structured long-term financial contract designed to mitigate the risk of outliving your retirement savings. You transfer a sum of cash to an insurance company or financial institution, and they invest it to produce steady income streams. The payout phase represents the period where you withdraw funds from this capital pool.

Key Annuity Terms

• Starting Capital (Principal): The initial amount of money deposited into the annuity fund.
• Annual Growth Rate: The rate of interest or investment growth credited to the remaining balance in your account.
• Payment Frequency: How often you receive payouts (usually monthly, quarterly, or annually).
• Fixed Term vs. Fixed Amount: Fixed term yields a guaranteed payout amount that drains the balance to zero at the end of the term. Fixed amount lets you define the withdrawal size, meaning the duration will fluctuate based on interest.