What is a contract designed to systematically liquidate accumulated assets through periodic payments called?

An annuity is a financial contract designed to systematically liquidate accumulated assets through periodic payments. It is typically used as a means of providing a steady income, often during retirement. When an individual invests a lump sum into an annuity, it can be converted into a series of payments made over a specified period, which can be for a fixed term or for the lifetime of the annuitant. This structure allows individuals to draw down their savings in a planned and organized manner, making budgeting for expenses more manageable.

An annuity's primary function distinguishes it from other financial products. For example, an insurance policy primarily provides protection against risk rather than liquidating assets. A mutual fund is an investment vehicle that pools money from various investors to purchase a diversified portfolio of stocks and bonds, without the guaranteed periodic payments associated with annuities. Lastly, a reserve fund is typically a savings account set aside for future expenses and does not inherently involve the systematic liquidation or distribution of cash assets. Thus, the annuity is the correct answer as it directly aligns with the concept of periodic payments from accumulated assets.