what comes off the top of my head
pros:
stable payment (not exposed to int fluctuation)
less credit risk from the payer (life insurance company normally highly rated)
cons:
vulnerable to inflation (inf goes up, real value decreases)
longevity (definite annuity payment length)
is there anything else?
once purchased can not be quit
payments not adjusted for inflation
freezer payments based on prevailing interes rates
if beneficiary dies fast he may not even recover his paments
Fixed rate annuity : not affected by change in interest rates, inflation and can’t be traded out.
if beneficiary dies fast he may not even recover his paments < - this one goes out to all annuities.
(-) to insurance company:
Fixed rate annuities = > if interest rate goes up, the company might have to sell securities at a loss to meet liquidity needs (disintermediation risk).
off record: be aware that asset marketability riskmight arise from illiquid assets.