Annuitates

Annuitates is a term used in finance to refer to annuities, contracts that provide a series of periodic payments in exchange for a premium or investment. The word derives from Latin roots meaning yearly or annual payments.

In practice, annuitates encompass a range of products and arrangements. Major types include immediate versus deferred annuities (payments begin soon after purchase or at a future date), and fixed, variable, or indexed annuities (payments are set, investment returns vary, or are linked to an index). People also distinguish lifetime annuities, which aim to pay for life, from term-certain annuities, which pay for a fixed period regardless of survival.

Valuation and calculation are central to annuitates. For a level ordinary annuity, the present value is PV = Pmt × [(1 − (1 + i)^−n) / i], where Pmt is the payment per period, i is the interest rate per period, and n is the number of periods. A perpetuity is a special case with n approaching infinity, PV = Pmt / i. These formulas guide pricing, loan comparisons, and retirement planning.

Uses and considerations vary by jurisdiction. Annuitates can provide steady retirement income, support structured settlements, or offer insurance-style protection. However, they involve risk and costs, including credit risk of the issuer, fees, surrender charges, and tax treatment differences. Inflation can erode fixed payments, making product features like step-ups or inflation riders important for some buyers.

See also: annuity, life annuity, perpetuity, present value.