In general the concept of an annuity is stupid. One can go receive a higher cash flow from an annuity than a bond or a stock that pays out a monthly dividend. There are several types of annuities but in short, one gives a large lump sum typically to an insurance company and they pay monthly, quarterly or yearly, depending on the annuity. Say one has $100,000 and they bought a traditional annuity they would withdraw money every month from the principle and then the insurance company would then add interest to that amount of the $100,000. At the end of the term you would receive a that money and then some but typically one could live off a annuity for a while but eventually the money would run out. This is the primary reason why I would never do an annuity because I rather have it in a bond or a stock that pays dividends. There are risks to any investments and annuities tends to be a complex contract that insurance companies enjoy selling because they can stack the deck in their favor. Stick the $100,000 in dividend paying companies that has a history of paying dividends. If one has that same $100,000 and they get a good 10% dividend yield that would be a good $10,000 per year. An annuity would give a person a much bigger cash flow but that $100,000 would disappear. Plus it is much easier to calculate a dividend yield than an annuity that has a complex contract. One of the reason why insurance companies like to sell annuities because they are trying to bet against one's person's death. If the annuity is based on one's person's death then one has to make sure that they have a high chance of living until they are well beyond 100 years old. These types of annuities typically have huge contracts and a lot of lawyers try to understand them and it takes time and effort if one is in need of a dispute against the insurance company in terms of annuities that are based off of either being alive or dead.
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