What is an annuity primarily designed to provide?

What is an annuity primarily designed to provide?

• A. One-time payment
• B. Regular income
• C. Investment capital
• D. Tax advantages

Answer: (B)

An annuity is primarily designed to provide regular income over a specified period of time, which is a key feature that distinguishes it from other financial products. This regular income can be beneficial for individuals looking for a steady cash flow, especially during retirement when they may no longer receive a regular salary. Annuities are structured to pay out a series of payments made at equal intervals, which can ensure that the investor has a predictable income stream, making financial planning easier. In contrast, options that include a one-time payment do not align with the nature of annuities, as they are built specifically for ongoing payments rather than a lump sum. While annuities can offer some benefits related to investment capital, their core purpose is not directed at accumulating wealth or capital for future use but rather at providing financial stability through income. Similarly, while there may be tax advantages associated with annuities, such as tax-deferred growth, this is a secondary benefit rather than the primary purpose of the product. Therefore, the most accurate answer for what an annuity is primarily designed to provide is regular income.

An annuity is primarily designed to provide regular income over a specified period of time, which is a key feature that distinguishes it from other financial products. This regular income can be beneficial for individuals looking for a steady cash flow, especially during retirement when they may no longer receive a regular salary. Annuities are structured to pay out a series of payments made at equal intervals, which can ensure that the investor has a predictable income stream, making financial planning easier.

In contrast, options that include a one-time payment do not align with the nature of annuities, as they are built specifically for ongoing payments rather than a lump sum. While annuities can offer some benefits related to investment capital, their core purpose is not directed at accumulating wealth or capital for future use but rather at providing financial stability through income. Similarly, while there may be tax advantages associated with annuities, such as tax-deferred growth, this is a secondary benefit rather than the primary purpose of the product. Therefore, the most accurate answer for what an annuity is primarily designed to provide is regular income.