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Expert: the cost of retirement annuities is justified

Life insurance companies are often accused of the high cost of services. This criticism is not fair, says Wade Pfau, director of the US Retirement Income Center, in his article for Forbes Magazine.
Expert: the cost of retirement annuities is justified

Annuity is an amount of money paid in equal instalments at regular intervals to a person who has entered into an annuity agreement with a life insurance company, for example, monthly, quarterly or annually in exchange for a contribution by instalments or in a single sum. This is a joint system of various participants who transfer their accumulated funds to an insurance company that pays pensions through the redistribution of risks. The main advantage of a retirement annuity, unless specific terms are specified in the contract, is the lifelong payout. That is, the insurance company with which the contract is concluded assumes the risk of paying a pension for life, but in the event of the client’s decease, it retains his funds. Staying in the pension fund, people can only rely on a certain period. If a pensioner has overcome this indicator of life expectancy, and his savings in the PF have ended, he will no longer be able to receive pension and will have to rely only on the minimum social allowance from the state.

Thus, the high cost of annuity is due to the long payout period. Insurers invest money in securities to increase capital.

Source: https://www.forbes.com/sites/wadepfau/2020/06/16/a-variable-annuities-overview/#55a29c951c76

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