Life Annuity

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Definition of 'Life Annuity'

A life annuity is a contract between an insurance company and an individual. In exchange for regular payments, the insurance company agrees to pay the annuitant a fixed amount of money for the rest of their life.

There are two main types of life annuities:

* **Fixed annuities** pay a fixed amount of money each month, regardless of how long the annuitant lives.
* **Variable annuities** pay a variable amount of money each month, based on the performance of an underlying investment portfolio.

Life annuities can be a good way to provide a steady stream of income in retirement. However, it is important to understand the risks involved before you purchase one.

One of the biggest risks of a life annuity is that you could outlive your money. If you die before you have received all of the payments that you are entitled to, your beneficiaries will not receive anything.

Another risk to consider is that life annuities are often sold with high fees. These fees can eat into your returns and make it difficult to accumulate enough money to support you in retirement.

Before you purchase a life annuity, it is important to do your research and compare different products. You should also make sure that you understand all of the risks involved.

If you are considering a life annuity, it is a good idea to talk to a financial advisor. They can help you assess your needs and find the right product for you.

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