An annuity is a financial product that provides a stream of income over a set period. Annuities are often used in retirement planning as a way to generate income from a lump sum investment.

However, there are different ways these payments can be structured, including ordinary annuities and annuities due. While the concept may seem straightforward, the timing of these payments can have an impact on the overall value of the annuity.

How an ordinary annuity works

An ordinary annuity involves a series of equal payments made at the end of each period. These periods can be monthly, quarterly or annually, depending on the specific annuity contract.

Imagine you invest a lump sum of money into an annuity. The annuity company holding your contract will then use this money to generate a stream of

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