Annuities are not that type of high-yield investments such as stocks. However, the internet is filled to the brim with claims of 10%, even 15% annuity returns. Want to know a secret? These levels of returns do not exist.
So why buy an annuity?
Simple answer: safety and security. Annuities are backed with investments — US Treasuries, AAA and AA rated corporate bonds — that have almost no risk.
There is one category of annuities that do pay higher yield than market returns. If you allow the annuity company to hold your funds long term, you can receive a higher than market yield return if you receive the funds as income.
Income? Isn’t that generally the best use for annuities? Almost without question, yes!
If you are part of the group worried about long-term income and making sure your funds last as long as you do, consider an annuity. Let the insurance company bear the risk and pay you each and every month, regardless of how long you and your spouse live.
If you use your retirement funds as retirement income, it is possible to receive a long-term return of 5-8%, not bad considering other available options.
Let the insurance company hold and use your funds and you benefit, simple and sensible.
However, be careful, annuities are long-term commitments, if the benefits match up with your long term needs then it can be a marriage made in heaven.
Remember, marriages made in heaven must be lived on earth, make sure your goals and needs align with the wonderful benefits annuities can provide, then it could be a heavenly deal.