Finesentence mobile logo
Sign in Login / Register

Annuity Meaning: Definition, Examples, and Translations

๐Ÿ’ฐ
Add to dictionary

annuity

[ษ™หˆnjuหษชti ]

Definition

Context #1 | Noun

finance investment

An annuity is a financial product that provides a series of payments made at equal intervals. It is commonly used for retirement planning, where individuals can convert a lump sum of money into a stream of income over a specified period, often for the rest of their lives. Annuities can be structured in various ways, including fixed, variable, or indexed. They may also include provisions for beneficiaries. The primary purpose of an annuity is to mitigate the risk of outliving one's savings.

Synonyms

insurance product, investment, pension.

Examples of usage

  • She invested in an annuity for her retirement.
  • The annuity payments will start next year.
  • He chose a fixed annuity for stability.
  • An annuity can help manage retirement income.

Translations

To see the translation, please select a language from the options available.

Interesting Facts

Historical Origins

  • The concept of annuities dates back to the Roman Empire where people paid for regular income in exchange for their property.
  • The word 'annuity' comes from the Latin 'annuitas' meaning 'yearly', highlighting its periodic payments.
  • In the 16th century, annuities became popular in England as the government issued them to finance wars and public expenses.

Finance

  • Annuities are often used as retirement income, providing a steady cash flow after someone stops working.
  • They can come in different forms, such as fixed, variable, and indexed annuities, each offering unique benefits.
  • The first known life annuity was offered in the UK in 1693, showing their long-standing significance in personal finance.

Mathematics

  • Calculating the value of an annuity involves understanding present value and future value, combining finance with mathematics.
  • The formula for calculating the present value of an annuity helps determine how much cash is needed today for future payments.
  • Actuaries use complex statistical models to assess risks associated with offering annuities, helping companies manage their financial exposure.

Cultural References

  • Annuities are often featured in discussions about retirement planning in popular media, emphasizing the importance of financial security.
  • They have appeared in many financial advice programs, showcasing strategies for wealth management.
  • In literature, characters contemplating their future often reference annuities as a safe way to ensure ongoing support.

Origin of 'annuity'

The term 'annuity' comes from the Latin word 'annuitas', which means 'annual' or 'yearly'. The root 'annus' translates to 'year', pointing to the fact that annuities typically involve yearly payments. The concept of annuities dates back to ancient Rome, where they were used in the form of 'contracts of exchange'. Throughout the centuries, various forms of annuities have evolved, with significant development during the Middle Ages in Europe when they were often used for funding churches and other institutions. By the 19th century, modern annuity contracts began to take shape in England, and they gained popularity as a means of providing a reliable income for the elderly. In contemporary finance, annuities are structured by insurance companies and are commonly utilized for retirement planning and wealth distribution.

Word Frequency Rank

At #6,186 in frequency, this word belongs to advanced vocabulary. It's less common than core vocabulary but important for sophisticated expression.