An
annuity one purchases to provide for oneself in
retirement. In general, one purchases a retirement annuity well before retirement and makes
contributions to it throughout one's working life. The contributions are
invested on behalf of the
annuitant, who begins to receive payments from the annuity after retirement. Many retirement annuities (especially those sponsored by an
employer) are
tax-deferred, meaning that the annuitant does not pay taxes on the
funds in the
pension until he/she begins making withdrawals. Annuities may have defined contributions, defined benefits, or both. See also:
401(k),
IRA.