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You Might Want An Annuity If…

It’s no secret that annuities have a bad reputation as retirement savings tools. Some annuities have high fees, many are extremely difficult (and costly) to liquidate if you need your money and the complexity of them often makes the heads spin of even the most experienced investors. Yet, given even these not-so-glorious attributes, some annuities are absolutely worth exploring. Here’s a list of a handful of scenarios where annuities would be great financial tools, according to a recent article from 
U.S. News.

  1. If guaranteed income for life is appealing to you, you might want to check out annuities. The lifetime income produced from an annuity is safe from market volatility, providing steady monthly payments until the policyholder passes away. If you priority is to make sure you don’t outlive your money, an annuity might be right for you.
  2. If you would like to secure guaranteed income for your spouse, an annuity can provide that. Certain types of annuities offer an option that provides  a lifetime guaranteed income for both you and your spouse. When you purchase an annuity, the insurer who writes the contract is banking on you and your spouse not living to your life expectancy age, while you’re betting that you live longer. It’s crucial to shop around, looking at a variety of rates from a number of insurers, as there will always be differences in the amount each are willing to pay out.
  3. If you’re interested in a low-risk portfolio above all else, an annuity may be right for you.  As long as you understand the terms of your annuity and pay the predetermined, agreed upon amount, you can secure guaranteed, no-risk income for life. If you fear market volatility and/or running out of money, annuities can make a whole lot of sense.
  4. If you are looking to create your own pension to fund your retirement, an annuity might be right for you. Today, many employers aren’t providing financially secured pensions for their employees. “Retirees used to count on the three-legged stool for their retirement income: Social Security, employee pensions and individual savings,” said Alex Whitehouse, a financial advisor in Vancouver, Washington. “Now only a small fraction of private sector companies provide traditional pension plans. An annuity could be used to generate lifetime income and replace the pension leg of the stool.”
  5. If you’re looking to protect your retirement assets from taxes, some annuities can provide that. Traditional retirement accounts, like IRAs and 401(k)s grow tax-deferred, so you don’t pay taxes on your money until you make withdrawals. Annuities provide similar tax benefits. “Using an annuity for a portion of your assets will allow your money to grow tax-deferred,” said Josh Brein, Seattle financial advisor. “So, if you’re not planning on taking all the money out for a while, then an annuity could be a good way to reduce your tax load in retirement.”
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