What is the primary purpose of purchasing an annuity?

The primary purpose of purchasing an annuity is to provide income that cannot be outlived. Annuities are designed specifically to offer a steady stream of payments to the annuitant, often for the remainder of their life. This feature addresses the concern of outliving one's financial resources, which is particularly important in retirement planning. People often seek the security of knowing they will continue to receive income regardless of how long they live.

While it is true that annuities can also serve other functions, such as accumulating savings or providing for immediate expenses, their most fundamental and distinguishing characteristic is the lifetime income they promise. This aspect makes annuities a valuable tool for individuals looking to ensure financial stability throughout their retirement years, alleviating the risk of depleting savings too soon.