Let's start with some history. Annuities are far from new. Abundance With Money Review They date back to the 1600s and even before then into the Medieval era. I remember coming across them while reading Victor Hugo lengthy and lovely Les Misérables which was penned mostly in the 1850s. When they were first created it was obviously before pensions and social security.
People would spend their whole lives saving up money and wish to retire. The concern became, “What if I live longer than I'm planning and run out of income from my savings when I am as old and frail as I'll ever be.” So initially they were a guarantee usually from a bank or insurance company that if you gave them a lump sum that they would give you payments for the rest of your life no matter how long you lived, but that if you died the institution would keep the funds.
They'd hoping you kick the bucket early so they can pocket more of your lump sum and you're hoping you live as long as possible for obvious reasons, but also so that you get more in payments than you gave to them. Over time, annuities changed as people wanted to guarantee them for both their spouse's life too.
When people were willing to take a lesser payment if it meant the institution didn't keep the principle if they died. Or, some would want to deposit the funds now and let the funds grow at a set interest rate until they were ready to take out payments. Or, others only wanted to commit for a short people of time and wished the funds to be liquid after a few years. On and on it went and the various products and solutions developed to meet the demand.
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