Final answer:
The main characteristic of an annuity is providing fixed payments over a set period, which provides a predictable income stream but may be affected by inflation.
Therefore, option 1 is correct
Step-by-step explanation:
The primary characteristic of an annuity is fixed payments over a specified period of time. This consistent income stream distinguishes annuities from other retirement savings options, such as stocks or bonds that can have variable returns. Pensions, a form of annuity often provided by private companies to retirees, are known as 'defined benefits' plans because they promise a fixed nominal dollar amount every year. Despite the security of fixed payments, annuities can pose a challenge during periods of inflation, as the purchasing power of these payments may decrease over time.