What is an annuity? ?
A pension annuity is something that will usually provide you with an income for the rest of your life. This is why it is regarded as such an important financial decision, many would argue that it is the most important financial decision that you will ever make.
More Questions From This User See All
Answers & Comments
You give a huge wad of cash to some financial institution and they agree to give you so much per month for the rest of your life. If you die the next year, your heirs do not get any of that money. (though sometimes provision can be made but the monthly pay-out would be less). The amount you agree on for the monthly payment may not be adequate in times of high inflation 20 years down the road. Interest rates may go up too in that time. If you live a really long time the institution may lose money on you, but basically they are gambling that you will die first, and you are gambling that you will not.