The primary reason for buying an annuity is to secure a guaranteed income stream , especially for retirement. This provides financial stability and peace of mind by ensuring regular, predictable payments for life or a set period, which helps to address the risk of outliving one's savings. Annuities offer a sense of security as they can supplement other retirement income sources like Social Security or pensions and generate lifetime income regardless of how long a person lives.
Details on the Primary Reason
- Annuities can guarantee income payments for life or a specified time, providing reliability and reducing investment risk for retirees.
- This guaranteed income helps people avoid the uncertainty of running out of money in retirement, giving peace of mind.
- Unlike typical investments, annuities are contracts with insurance companies, ensuring a steady paycheck even in advanced age.
- They also provide protection against longevity risk (the risk of living longer than savings last).
Additional Benefits Related to Income Security
- Many annuities allow customization with riders for added benefits like long-term care or inflation protection.
- Some annuities offer death benefits or survivorship options so the income stream can continue for a spouse or beneficiaries.
- Annuities grow tax-deferred until withdrawals begin, which can enhance retirement savings.
In summary, the primary reason for buying an annuity is to guarantee a stable, predictable income stream for retirement to ensure financial security throughout one's lifetime.
