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In light of these difficulties, let's focus on the one source of annuities that is fully inflation protected, is fairly priced, and, because it is run by the government, is reasonably safe: Social Security benefits.
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But now an important source of the funding – annuity inflows – will evaporate.
Solvency 2, a pending set of rules governing European insurers, is one source of pressure: it will force annuity providers to hold more capital against unhedged longevity risk.
Still, in a time of low returns and few guaranteed sources of income, there is often a desire for the perceived security of annuities, which come in many forms.
What will also help is a change in the family income — say a spouse has found a higher-paying job or was promoted, or you inherited an annuity or another source of steady income.
Sales of annuities jumped 21percentt.
Safety of Annuities My mother has an annuity she purchased through JP Morgan Chase for $100,000 about three years ago.
But the criticism of annuities can get rather confused.
And in the Economic View column, the economist Richard Thaler revisits the annuity puzzle — the unpopularity of annuities despite their economic advantages.
A life annuity, a subclass of annuities in general, is one in which the payments are guaranteed for the lifetime of one or more individuals.
(To keep reading about annuities, see "Taking The Bite Out Of Annuity Losses" and "An Overview Of Annuities").
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Justyna Jupowicz-Kozak
CEO of Professional Science Editing for Scientists @ prosciediting.com