What is an annuity?

An annuity is defined as a series of equal dollar payments made at regular intervals over a specified period. This financial product is commonly used for retirement planning, allowing individuals to receive a predictable income stream. Annuities can be structured in various ways, such as immediate versus deferred, and they can span different lengths of time, but the key characteristic that defines an annuity is the uniformity in the payment amounts and the consistency in the timing of these payments.

For instance, someone might purchase an annuity that pays a fixed amount monthly for a certain number of years or until their death. This provides financial stability and helps in budgeting for future expenses.

The other options do not align with the true definition of an annuity. A single payment is simply a one-time transaction and does not encompass the concept of repeated payments. Variations of stock investments refer to different types of equity holdings rather than structured payment plans. A fixed loan amount typically involves repayment terms that may vary in payment amounts and timing, which also distinguishes it from an annuity.