Final answer:
An annuitant can avoid outliving their benefits with a defined benefits plan, like a private company pension. These pensions provide fixed payments and are not adjusted for inflation, though they guarantee income for life.
Step-by-step explanation:
An annuitant is guaranteed to NOT outlive their benefits with a defined benefits plan, typically known as a pension. Retirees who receive a private company pension are part of a group that traditionally receives a large share of their income in a form that does not increase over time.
These pensions are set as a fixed nominal dollar amount per year at retirement and are not adjusted for inflation, which can lead to a loss of buying power over time. For instance, a retiree on a fixed income at age 65 may find that even a slight inflation rate of 1% to 2% per year can significantly erode their purchasing power over a decade or two.
To combat the effects of inflation and ensure financial stability, employers offer pensions that act like annuities—fixed annual payments funded by the firm through a pension fund.