Final answer:
Annuities provide fixed payments for a specified period, offering a lower-risk income stream for retirees. Traditional pensions are similar to annuities with fixed payments that do not adjust for inflation, potentially leading to a loss in buying power over time.
Step-by-step explanation:
Yes, annuities are financial products that are structured to provide fixed payments for a specified period of time. These are often used as a means to secure a steady income stream for retirees. Traditional annuities, which can be acquired through a lump sum payment or over time, offer fixed annual payments, acting as a safer investment with predictable outcomes. However, it is worth noting that while annuities present a lower risk compared to variable investments such as stocks and bonds, they tend to provide lower returns and are potentially susceptible to inflation. A private company pension, which is similar to an annuity, is considered a "defined benefits" plan, where retired individuals receive fixed nominal dollar amounts annually. This fixed income stream does not adjust for inflation, leading to a potential loss in buying power over time, which can become quite substantial as even low inflation rates can compound significantly.