What is usually the primary purpose of an annuity?

The primary purpose of an annuity is to provide a stream of income during retirement. Annuities are financial products designed to convert a lump sum of money into a predictable income stream, often for the duration of the individual's life or for a specified period. This feature is particularly beneficial for retirees who want to ensure they have a steady income after they stop working.

Individuals purchase annuities as a means of safeguarding against the risk of outliving their savings, as they can offer guaranteed payments over time. This structure helps retirees manage their budget effectively and provides peace of mind knowing that they will have consistent financial support during their retirement years.

In contrast, while other options mention important financial needs, they do not accurately capture the primary role of annuities. Life insurance coverage focuses on providing a death benefit, accumulating savings for education targets a different goal altogether, and addressing long-term care expenses is a specific need that may not directly relate to the fundamental purpose of annuities.