annuity
uh-NOO-ih-tee
/əˈnuːɪti/
A fixed sum of money paid to someone each year, typically for the rest of their life.
Often purchased from an insurance company to convert a lump sum into a steady stream of income.
The story behind the word. Derived from the Latin 'annus' (year), an annuity was originally a 'yearly' payment. It reflects the agricultural roots of finance, where wealth was measured by the annual harvest.
Word relationships
- income stream: A broader term for any recurring revenue.
- lump sum: A single, one-time payment of the total amount.
Commonly confused with
- pension: Pensions are usually employment-based; annuities are usually private financial products.
Word family
- annuitant (noun): The person who receives an annuity.
Collocations
- fixed annuity
- deferred annuity
- annuity rate
Example sentences
- "A small annuity is better than a large expectation." Classic Literature
- "She decided to invest her inheritance in a life annuity to ensure she would never outlive her savings." Financial Planning
Memory hook
'Ann' receives her 'uity' (unity) of payment every 'ann'ual cycle. Yearly peace of mind.
When not to use
Don't use 'annuity' for a one-time gift; it must be a recurring, scheduled payment.
Fun facts
- In the 17th century, governments sold annuities to citizens to fund wars.
Related words
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