What is the primary function of annuities?

The primary function of annuities is to accumulate money and provide a method for liquidating that accumulation over time, typically in the form of regular payments during retirement. Annuities are financial products designed to address the risk of outliving one’s savings. They allow individuals to invest a sum of money, which then grows on a tax-deferred basis.

Once the individual begins withdrawing from the annuity, it can provide a steady income stream, often for the remainder of their life. This feature makes annuities particularly appealing for retirement planning, as they can help ensure that individuals have a reliable source of income even after they cease working.

The other choices present functions that are not the primary purpose of annuities. While annuities can be used in conjunction with funding retirement accounts, they are not primarily designed just to fund these accounts. Additionally, annuities are not primarily aimed at providing life insurance benefits or short-term investment options; rather, they are more closely related to long-term income solutions.