In terms of investment goals, what is the primary purpose of an annuity?

The primary purpose of an annuity is to offer a guaranteed source of retirement income. Annuities are financial products designed specifically to provide individuals with a steady income stream during their retirement years, which can help ensure financial stability when people are no longer earning a regular paycheck. They often come with features such as fixed payments or variable payments based on investment performance, aimed specifically at catering to the needs of retirees who seek predictability and security in their financial planning.

By focusing on a guaranteed source of retirement income, annuities address the crucial need for individuals to maintain their standard of living after they stop working. This characteristic makes them particularly suitable for those nearing retirement or already retired, allowing for careful management of longevity risk—the risk of outliving one’s savings.

While other options might reflect certain advantages or secondary roles that annuities can play, such as assisting in estate planning or providing benefits to heirs, these are not their primary function. Annuities are fundamentally structured to ensure a steady flow of income during retirement, distinguishing them from other financial products that might seek to maximize growth or deliver immediate benefits.