Final answer:
Annuities are not usually intended to create an estate but are designed to provide a regular income stream for retirees. The incorrect statement is that annuities create an estate for the insured's family.
Step-by-step explanation:
Among the statements provided about annuities, the one that is NOT correct is C. Annuities are used to create an estate for the insured's family. Annuities are financial products designed primarily to provide a steady stream of income during retirement, often referred to as 'defined benefit' plans. They are generally not intended to create an estate, as the core purpose is to ensure the annuitant has a reliable income and cannot outlive their money with a Life Annuity.
Saving for old age can involve various private-market options such as stocks, bonds, and annuities. While investing in annuities can be a safer option with fixed payouts, the trade-off might be lower total income compared to riskier investments with potentially higher rates of return. Additionally, annuities benefit from being tax deferred during the pay-in period, meaning that taxes on interest are not due until the funds are withdrawn, as is common with 401(k)s.
Inflation can diminish the purchasing power of fixed incomes over time, which is a risk associated with fixed annuities or private company pensions. However, this risk is not specifically associated with an annuity's ability to generate an estate. Therefore, it's the statement about annuities being used to create an estate that is incorrect.