Annuities

What are Annuities?

An annuity is a contract between an individual and an insurance company. The investor contributes a sum of money either up front or over time and the insurer promises to pay the investor a regular stream of income in return. Read on to see potential pros and cons to annuities.

Pros

Continuous Income Stream from Insurer
Tax Deferral of Annuity Earnings
Potential Guaranteed Rates of Return from Fixed Annuities
Death Benefits May be Available

Cons

Annuities, Especially Variable Annuities, can be Pricey
The Guaranteed Returns May not Match Long Term Investment Returns
Annuities Tend to Have Surrender Periods, where your Investment can be Locked in for Several Years.

Is an Annuity Right for You?

There are several circumstances where an annuity would be an appropriate investment vehicle for clients. These include:

Very Low Risk Tolerance or Aversion to Equity Markets, but Looking for a Decent Return
Looking for Tax Deferral of Investment Earnings Especially after Maxing out Retirement Contributions
Concern that Savings will Run Out During Retirement

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Immediate vs. Deferred Annuities

Looking forward to retirement? It's critical to understand the difference between immediate and deferred annuities.

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Retirement Income and the Traditional Portfolio

Experiencing negative returns early in retirement can potentially undermine the sustainability of your assets.

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