Final answer:
To receive all the money from a straight life annuity contract, the annuitant must outlive the life expectancy the annuity is based on. This fixed payout annuity ceases upon death, posing a risk of not fully recouping one's investment unless they live long enough.
Step-by-step explanation:
If an annuitant selects the straight life annuity settlement option, in order to receive all of the money out of the contract, it would be necessary to outlive the actuarial life expectancy that the annuity is based upon. A straight life annuity provides regular payments for the lifetime of the annuitant but ceases upon their death, without any residual value to beneficiaries. Essentially, the payments received must equal or surpass the amount paid into the annuity to 'get all the money out.'
For those saving for old age, a straight life annuity is considered a safer investment because the payouts are fixed and not dependent on variable market conditions. Nonetheless, it presents the risk of the individual not receiving the full value if they do not live long enough. This has to be weighed against other private market options like stocks, bonds, or even interest from savings accounts, which carry different risk profiles and potential rates of return.
In addition to annuities, individuals can also rely on cash-value life insurance policies as a financial planning tool for old age. These policies not only provide a death benefit but also accrue cash value over time, which can be drawn upon or borrowed against during the policyholder's lifetime, offering an additional layer of financial security.