Many investors are familiar with immediate annuities, which pay monthly income for life as soon as they are purchased. Deferred annuities also pay for life but don't start paying for a set number of years – and are more generous because of the delay. But unless you add expensive bells and whistles, money in an annuity is locked up for the long term and cannot be taken back as a lump sum. Payouts seem generous because each includes a bit of your original principal. If you die before payments equal your original purchase price, the difference is lost and not there for your heirs.
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