How to Create Your Own Pension: A Closer Look at Immediate Annuities
by Julie Jason
Some retirees who face the danger of outliving their money (“longevity risk”) choose to self-insure through conservative investment and cash flow management.
Others transfer longevity risk to an insurance company by purchasing an “immediate annuity.” The insurance company has an advantage over the individual in that it can spread longevity risk across many lives with varying lifespans.
Think of the immediate annuity as a “personal pension.” Like a pension, the immediate annuity can provide lifelong income. And, like a pension, the product carries certain risks that need to be addressed before making a purchase.
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