Can someone explain this, I know it’s simple but I always miss the concept
Risk of outliving your assets. If you save enough for retirement based on average life expectancy and you happen to live longer than average, your assets will be depleted = longevity risk. You can hedge micro longevity risk by purchasing an annuity that will pay a stream of income for as long as you’re alive. This is possible since some people will die before and some after average life expectancy (concept of mortality credits).