An Annuity is a type of savings that guarantees compounded interest at an agreed upon rate, or based on an index selected at the time of creation. Unlike insurance there is no death benefit, however none of the money secured therein goes toward that cost therefore a higher rate of return can be realized. Your principal is guaranteed not to diminish and depending on the policy may even be guaranteed to increase by a predetermined amount.
The money may be placed into the Annuity all at once or in payments over time, and it stays in the Annuity for a specified term for example 2 years, 5 years, or 10 years. Once the term expires, the Annuity holder can either renew it for another term, withdraw the funds entirely, or begin to receive monthly amounts while leaving the remainder to increase with the power of compounded interest.