Annuities as an Investment Vehicle

By |2020-04-13T18:24:39+00:00February 13th, 2019|Annuities, Annuities 101|

Annuities can provide guarantees in your important investments

Annuities are investment products with an insurance component based on the financial strength of the annuity issuing insurance company. Annuities offer an attractive alternative option to secure a steady lifetime income stream with flexible options based on the investor’s preferences of security and risk. Annuities are also unique in the sense that income from gains and contributions are tax-deferred until you decide to withdraw.

Fixed vs. Variable Annuity Investment Issues

Fixed annuities can provide a certain measure of protection against the vagaries of the market since annuities are tied to the index, as opposed to individual stocks. Besides, the issuing company guarantees a bottom line, and your investment is protected from being wiped out by market risk or downside. The question of whether to annuitize your investment or allow it to appreciate and withdraw in a lump sum depends on your financial status upon retirement, including your tax bracket and other sources of income.

Variable annuities are classified as securities and can offer a lot more flexibility to the investor, allowing multiple sub-accounts for investments. The returns from variable annuities depend on the performance of your accounts. Variable annuities are highly attractive to investors who want higher returns than a traditional retirement investment vehicle, but which offers some of the common benefits and safety nets associated with insurance and other retirement investments. Variable annuities can lose value and have market exposure.

Annuity benefits from an Investment perspective

While annuities, and the net returns they generate, are based on a series of factors which vary depending on the issuing company and your choice of annuity, they do offer tremendous flexibility in terms of transferring sub-accounts and the entire annuity itself. Due to the highly profitable nature of annuity products, insurance companies provide a variety of incentives and bonuses to get investors to transfer. This generally helps to offset the early surrender charges applicable when you bail out on an annuity investment.

Ultimately, the essential benefits from an annuity are death benefit, tax deferral, and guaranteed income payments. No other investment vehicle will continue making payments without management or risk, even if you live well into a ripe old age. Either your existing capital dries up, or you have to continue managing, with some risk, an investment portfolio. With an annuity, the accumulation and distribution phases of investment are merged and what you get is an investment vehicle which offers substantial and continued returns with relatively lower or no risks in the long term.

It is to be noted that there are various kinds of annuities ( immediate fixed, deferred variable, etc. ) within the two main types, and numerous insurance companies who offer annuity products with varying rates of return, different administrative and annual charges, and differing corporate policies for allocation of sub-accounts, annuity surrenders, and transfers. Each annuity and each company has its own set of advantages and features. Which annuity from what company is most suitable for you, and offers the most benefits, should be decided in consultation with your financial advisor.


  • This field is for validation purposes and should be left unchanged.

Premium gift for you for registering for my newsletter

I am a member of Syndicated Columnists, a national organization committed to a fully transparent approach to money.

Interested in additional information? Register for my FREE bi-monthly newsletter, "Layin' it on the line." It contains information that other people have found beneficial. I will never sell your information.

For registering, I have a Premium Gift for you.

Our 15th edition, “Safe Money Book” a $20 value

77,000 copies in circulation

Learn the basics of a Safe Money approach to investing.

And it is FREE with your "Layin' it on the line" newsletter

About the Author:

Bill Broich is a well-known annuity expert with over 30 years of experience. He has written hundreds of articles on annuities and other financial topics, and has been a featured commentator on TV, Radio and the Internet.

Toll-Free: (360) 701-6209 | GVA, | Email: