What does an annuity provide safeguards against for retirees?

An annuity is primarily designed to provide retirees with a steady stream of income for a specified period or for the remainder of their lives. This structure helps safeguard against the risk of outliving their retirement benefits. As people are living longer, there is an inherent uncertainty about how long retirement savings will last. An annuity can address this concern by offering guarantees of income, allowing retirees to budget their expenses without the fear of depleting their funds too soon.

This feature of annuities is particularly valuable in retirement planning, as it allows individuals to manage their financial resources more confidently, knowing they have a consistent income source. Other factors like market volatility, economic downturns, or rising healthcare costs might affect a retiree's financial situation but do not specifically relate to the core purpose of an annuity, which is income longevity and stability.