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Why do people have Annuities?

Many people buy annuities to give them retirement income for the rest of their lives. An annuity contract can also be a safe means of building assets for other purposes with a more limited time span.


It includes many people who purchase annuities because they do not belong to retirement plans or because they want to supplement their pensions. The list may also include a person who has sold his or her business, a couple that has sold its home, a widow or divorcee who needs the most income possible, but wants safety in terms of monthly payments, a grandparent who wants to provide for grandchildren or someone who has had a big income for one or two years but who can't be certain about the future.


Deferral of taxes is a big benefit, and so is the ability to put large sums of money into an annuity — more than is allowed annually in a 401(k) plan or an IRA — all at once or over a period of time. Annuities offer flexible payout options that can help retirees meet their cash-flow needs. They also offer a death benefit; generally if the contract owner or annuitant dies before the annuitization stage, the beneficiary will receive a death benefit at least equal to the net premiums paid. Annuities can help an estate avoid probate; beneficiaries receive the annuity proceeds without time delays and probate expenses. One of the most appealing benefits of an annuity is the option for a guaranteed lifetime income stream.
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