An annuity is a contract between an individual and an insurance company: you pay a premium (as a lump sum or over time), and the insurer agrees to make periodic payments back to you — either immediately or at a future date. According to LIMRA, total U.S. annuity sales reached $432.4 billion in 2024, a record high, reflecting growing demand for contractual retirement income. This guide explains how annuities work, the main types, common fees, key risks, and how they fit into a retirement plan.