Why Do People Buy Annuities?

By Brent Meyer — SafeMoney.com Founder & Editor Reviewed by Licensed Financial Professionals  |  SafeMoney.com — Trusted Since 2011  |  Updated Regularly Quick Answer: People buy annuities to supplement Social Security, secure a guaranteed lifetime income, grow money tax-deferred, protect assets from market losses, and guard against inflation — among other compelling reasons. Annuities come in many forms, and their contractual guarantees make them one of the most versatile retirement planning tools available. If you are exploring ways to generate income in retirement , you may have thought about annuities at some point. Of course, annuities can be quite involved sometimes. They come in many flavors, and it's quite natural to ask why people buy annuities. The reasons are different for everybody. But one short answer is because annuities can provide more financial peace of mind with their contractual guarantees , backed by the life insurance company. Annuities have grown in popularity, as people can use them to supplement their Social Security payouts, have a guaranteed lifetime income stream, earn interest on their money, protect their assets against market losses, and enjoy tax-advantaged financial growth. Paying for long-term care, offsetting inflation, and shielding assets from probate and creditors are a few other reasons as well. In this article, we will delve into reasons behind why people buy annuities and how these guaranteed financial vehicles can contribute to a well-rounded financial strategy. Eight Reasons Why People Buy Annuities Here are the major reasons why people buy annuities for their retirement planning strategy. Of course, they are just a few of many motivations for annuity contract ownership. 1. Supplementing Social Security This is one of the biggest reasons why people own annuities, as many surveys report. While it provides a basis for retirement income, Social Security often falls short of covering all monthly living expenses. Retirees need additional sources of income to keep up their desired lifestyle, especially as life expectancy in retirement goes up. Annuities bridge this income gap by offering a steady stream of payments that can complement Social Security benefits. This extra income not only helps cover monthly expenses for your lifestyle, but also provides peace of mind by providing you with ongoing, predictable income payouts each month. 2. Guaranteed Lifetime Income Stream One of the most compellin