What is a key characteristic of annuity plans?

Annuity plans are primarily designed to provide a steady stream of income over a specified period or for the lifetime of the annuitant. This income generation aspect is a distinguishing characteristic of annuities, making them an appealing financial product for individuals seeking to manage their cash flow during retirement or other life stages.

The structure of annuities allows policyholders to convert a lump sum of money into ongoing payments, which can be critical for budgeting and ensuring that retirees do not outlive their savings. This focus on providing a reliable income stream aligns with the needs of many individuals, particularly as they transition into retirement when steady cash flow becomes essential.

In contrast, other characteristics that may appear to be related to annuities are less defining. For example, while some annuities may provide life insurance protection, this is not a fundamental feature of all annuity products. Additionally, while annuities can be used as investment vehicles, their primary goal is not investment growth but rather income stability. Lastly, although they are often marketed for retirement, annuities can also serve individuals looking for income in other contexts, which means they are not exclusively tied to retirement savings.