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Tori has an annuity that pays her a $500 per month income benefit for life or for ten years, whichever is longer. What kind of annuity is this?

User Mikl
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1 Answer

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Final answer:

Tori has a life annuity with a period certain, which provides $500 monthly for life or ten years, whichever lasts longer. It offers income security for retirees and protection against inflation's effect on fixed incomes.

Step-by-step explanation:

The type of annuity Tori has is called a life annuity with a period certain. This annuity guarantees income payments for the lifetime of the annuitant or for a specified period (in this case, ten years), whichever is longer. Even if Tori lives beyond ten years, she will continue to receive the $500 monthly benefit for as long as she lives.

This provides a measure of income security and protection against longevity risk, which is the risk of outliving one's income. This type of annuity is particularly significant for retirees who rely on a fixed income from sources such as private company pensions, especially considering the impact of inflation over time that can erode purchasing power.

User Yanayaya
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