Final answer:
Retired people commonly put money into an annuity to secure a monthly disbursement of funds. Annuities offer fixed payments and are generally safer but may yield lower returns compared to other retirement investments like 401(k)s, which can adjust to inflation and offer higher potential growth.
Step-by-step explanation:
Many retired people put money into an annuity so they can receive a disbursement of money each month. An annuity is designed to provide a steady income stream, often purchased through a lump sum or over time, which can be particularly valuable for retirees seeking financial stability. This form of saving for old age is considered a safer investment because the payouts are fixed, which can be advantageous in managing the inflation risks associated with pensions that offer defined benefits. However, compared to other retirement savings options that may provide variable returns, such as stocks, bonds, and defined contribution plans like 401(k)s and 403(b)s, annuities usually lead to lower total income. Those other retirement savings options often involve investments that can generate higher rates of return and are designed to adjust with inflation over time, protecting the buying power of retirees.