Annuities are financial instruments that provide retirees with a reliable and steady income stream. Popular among retirees, annuities have both an accumulation phase and annuitization phase. During the accumulation phase, investors make a lump sum or periodic payments into the annuity to fund it. Once annuitization begins, the annuitant will begin to receive payments.

Although annuities can guarantee a regular income stream in the future, they are also extremely flexible. Annuities can be structured into different kinds of instruments, such as immediate and deferred annuities, which gives investors a range of options based on their needs. Immediate annuities start providing payments soon after the lump sum is invested, while deferred annuities start payments at a later point in time. Furthermore, annuities can also be structured as either fixed or variable.

Fixed annuities come with a guaranteed rate of return during the accumulation phase and the payments in the annuitization phase are decided upfront. This reliable fixed stream of payments can make them attractive for investors who seek steady income. Variable annuities, on the other hand, offers an array of investment options which are linked to the stock market. While this makes these annuities higher risk, if the investor's account value perform well, they can receive higher payouts in the annuitization phase.

As such, annuities can be a useful tool for retirees who seek a guaranteed income stream. However, it is important to note that some annuities contain restrictive surrender penalties, which can make it difficult for investors to access their money prior to the annuitization phase. Furthermore, the cost and fees associated with annuities vary significantly, so investors should thoroughly review them before investing.