Pure Annuities

In a comment to June 19’s post, Anonymous asked what I mean by “pure” annuity. “Pure annuity” is not a term of art, I’m afraid. I made it up. Forgive me for not defining my terms.

What I meant by “pure” annuity is an annuity that pays an agreed annual payment, beginning at an agreed starting date, either for your life, or for the life of you and your spouse. It is “pure” in the sense that it does not contain the following features:
• Payment does not vary with the performance of some asset class, such as with the S&P 500 index; that’s called a “variable” annuity. In my mind, however, an annuity that varies with an inflation index is an acceptably pure annuity.
• Payment is not guaranteed for a minimum period, such as 10 years, should you not live that long. It’s purely for your life. In my mind, however, an annuity that continues for the life of your spouse, should he survive you, is pure enough. Most couples properly view themselves as a single economic unit.

I’m no expert on annuities. I know what I like about them in concept, but I don’t know enough about them to know when they’re a good deal or a rip-off. For a good informative website about annuities, go to AnnuityDigest.com.