Retired people need life annuities – contracts that offer a stable income stream for as long as they live – to insure against the risk of outliving their wealth. If there were no longevity risk – that is, if the probability of dying at each age in the future were reliably known – then pension funds could easily offer life annuities to large numbers of people by investing their assets in bonds of various maturities in order to pay out just the right amount each year.