What is a characteristic of the annuity settlement option?

The characteristic of the annuity settlement option that guarantees a regular income for a defined period is fundamental to how annuities operate. When an individual chooses an annuity settlement option, they are essentially converting their lump sum investment into a series of periodic payments, ensuring a steady income stream over a specified timeframe. This is particularly beneficial for individuals who seek financial security during retirement, as it provides consistent cash flow to cover living expenses.

Annuities are structured to spread the value over time, thus preventing the risk of outliving one’s assets. By locking in regular payments, annuity holders can manage their finances more effectively, as they have a predictable income source.

Other options involve different aspects of financial products that do not align with the primary function of the annuity settlement option. For instance, requiring a lump sum payment pertains to an initial investment rather than the income provision. The provision of death benefits to beneficiaries is more typical of life insurance policies, which focus on providing a financial payout after death. Immediate access to cash value is characteristic of certain savings or investment accounts rather than annuities, which are designed for long-term income distribution.