While some financial “gurus” tout on about annuity scams and how much they “hate” annuities, is there really any validity to these claims?
There could be… but it depends on how you want to skew the data.
The reality is that annuities are a type of insurance product – and as such, they are able to make certain guarantees that other financial vehicles, such as stocks, bonds, and mutual funds, just simply cannot.
So, what’s the real story on annuities?
Pros and Cons of Annuities
The best way to determine whether or not a financial vehicle like an annuity is a good fit isn’t listening to or reading off-handed comments on TV, the Internet, or the cover of a magazine in the grocery store check-out line.
Rather, it is learning how it works, and whether or not the features and benefits line up with what it is that you are specifically looking for.
As an example, if you are seeking income in retirement, annuities can provide that for you. With a fixed or fixed indexed annuity, you can create an incoming cash flow stream that continues for a specific period of time, or even for the remainder of your lifetime – regardless of how long that may be.
If you aren’t quite ready to start generating income yet, you could make one or more contributions into an annuity, and then generate tax-deferred growth in the account. The way this growth is determined can depend on whether the annuity is fixed, indexed, or variable.
Many annuities also provide added benefits, like a death benefit for leaving a legacy, and penalty-free access to funds in the account if you are diagnosed with a critical, terminal, or chronic illness and/or you require long-term care services (usually for at least a minimum period of time).
Thanks to the various riders and other options that are available with annuities, it is possible to “customize” an annuity to closely fit your particular financial and retirement objectives – oftentimes for both the short and long-term time horizon.
Because most annuities will charge surrender fees if you withdraw money before a certain period of time has elapsed, you should typically consider an annuity as a longer-term financial commitment. Further, while some annuities – particularly variable products – are known for charging high fees, fixed and fixed-indexed annuities do not typically do so.
Another possible drawback of annuities is the many “moving parts” that make up these products. For instance, unlike buying a single stock or bond, annuities can have numerous features that are all intertwined. Because of that, it is recommended that you work with an annuity or retirement planning specialist before moving forward.
Advantages and Disadvantages of Annuities
|Annuity Benefits||Annuity Drawbacks|
|Tax deferred growth||Surrender charges|
|Customizable features||Fees (primarily on variable annuity products)|
|Money management assistance||Confusing|
|Guaranteed income – even for the remainder of your lifetime|
Is an Annuity Right for You?
There are many different types of annuities available in the marketplace today – and these are all somewhat different from one another. Because of that, it is critical that you understand how annuities work and what you can (and can’t) anticipate from these products.
The best way to do this is by discussing your needs and objectives with a financial professional who specializes in annuities. That’s where Annuity Gator comes in!
At Annuity Gator, our primary mission is on educating consumers – as well as financial advisors – on how annuities work, and whether or not one may be the right choice. So, if you have questions – or if you’d like to discuss whether or not an annuity is right for you – contact us at (888) 440-2468 or send us an email by going to our secure online contact form. We look forward to meeting you!