A fixed target annuity with a guaranteed lifetime withdrawal benefit offers a specific level of income during retirement, even if market fluctuations impact the underlying investment. This type of annuity aims to provide a predictable income stream, protecting retirees from outliving their savings while also potentially participating in market gains. For example, a retiree might invest a lump sum and receive guaranteed withdrawals starting at a future date, regardless of market performance.
These products offer a balance between security and growth. The guaranteed income stream helps mitigate longevity risk, the risk of outliving one’s assets. Potential market participation allows for the possibility of increasing the income payments over time. The development of such financial instruments addresses the growing need for secure retirement income solutions in an increasingly complex financial landscape.
