What type of contract guarantees fixed or variable payments at a future date, often at retirement?

An annuity is a financial product specifically designed to provide guaranteed payments, either fixed or variable, at a specified time in the future, commonly during retirement. It functions by converting a lump sum payment or a series of payments into a stream of income. This feature makes it particularly appealing to individuals looking for a reliable source of income during their retirement years.

When an individual invests in an annuity, they typically choose to receive payments over a certain period, which can last for a defined number of years or for the remainder of their lifetime. The certainty of receiving these scheduled payments is a key characteristic that distinguishes annuities from other financial products.

In contrast, the other options do not offer the same structure or guarantee of future payments. Mutual funds focus on pooling investments to achieve growth or income through various assets but do not promise fixed payments. An insurance policy primarily provides coverage against risks rather than a guaranteed income stream. A trust fund can manage and distribute assets according to specified terms but does not inherently guarantee regular payments. Thus, the unique attribute of an annuity lies in its commitment to delivering fixed or variable payments at a future date, reinforcing its suitability for retirement planning.