Quote:
Originally Posted by Hawkshaw
An annuity is a stream of payments. For example, let's say you had $1,000,000. You could take that money to an insurance company and they would sell you an annuity. So you give them the $1,000,000, and they give you an annual income of $55,000 or so for life. If you die the next day, shitty for you, the insurance company wins, but if you outlive their projections, then you end up taking out more than you put in. As a whole though, the insurance company is ok because they win some and they lose some.
Basically, it protects you from outliving your money. A lot of people buy annuities with their RRSP savings (in Canada) or 401K savings (in the US) when they retire to ensure income for life.
Same sort of thing with lottery winnings - they usually give you choice of a lump sum up front, or a stream of payments for 20 years or something like that...the stream of payments would be an annuity.
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is that number accurate? why in gods name would someone pay an insurance company 1 million dollars to give them a yearly income of 50k for the rest of their life? you can get that much each year from 1 million dollars in
no risk investments and still have the million dollars
if i was going to pay an insurance company 1 million dollars they better be paying me something more like 100k a year