An annuity is a financial product that provides a regular income stream to an individual in exchange for a lump-sum payment or a series of payments. Annuities are often used as a retirement income source but can also be used for other purposes.

The three main types of annuities are fixed, variable, and indexed. Fixed annuities guarantee a fixed rate of return for a specified period, usually between one and ten years. The insurance company determines the interest rate and is unaffected by market fluctuations.

Fixed annuities are a good option for individuals who want a guaranteed income stream and are risk-averse. Variable annuities, on the other hand, offer a range of investment options, including stocks, bonds, and mutual funds.

The return on investment depends on the performance of the underlying investments, and the annuitant assumes the investment risk. Variable annuities are suitable for individuals who are comfortable with market fluctuations and want the potential for higher returns.

Indexed annuities are a hybrid of fixed and variable annuities. They offer a guaranteed minimum interest rate and the potential for higher returns based on the performance of a chosen stock market index. Indexed annuities are a good option for individuals who want some exposure to the stock market but are risk-averse.