“Annuities aren’t suitable for everyone. But those looking for guaranteed lifetime income without market risk might want to consider them.”- Jeff Kennedy
Annuities are the only financial vehicle that gives you a guaranteed lifetime income without exposure to risk and volatility. As such, annuities are a powerful, flexible option to help pay for long-term-care-related expenses such as assisted living, home health care, and adult daycare.
While it’s true that annuities aren’t for everyone, specific individuals will benefit from having one or more annuities in their portfolios, locking in gains, and protecting against the market’s ups and downs.
Other annuity advantages include:
- You have the potential to grow your retirement savings more rapidly with an annuity’s tax-deferred growth and triple compounding.
- Certain annuities offer rates that beat those of certificates of deposit and other safe money instruments.
- Fees for most annuities are minimal or none at all.
- Annuitization or lifetime income riders may help offset inflation and longevity risk.
- Certain individuals who need to make more aggressive investments may find annuities help them to do so with more confidence, knowing they have a guaranteed income stream.
- Modern annuities are more flexible and customizable than ever.
- Annuities have less stringent underwriting criteria than permanent life insurance.
Like every other kind of financial vehicle, annuities also come with some potential disadvantages.
- Most annuities are long-term contracts between you and an insurance company. Annuities aren’t a good choice for those seeking short-term solutions.
- Once you annuitize your contract, you can’t undo this action. However, adding a “lifetime income rider” can help you avoid getting stuck.
- An annuity’s liquidity is negligible. Many annuities give you access to only 10% of the contract’s value annually until it expires.
- Variable or “buffer” annuities may expose your money to risk due to market volatility.
- Unless you are looking for protection of your principle, income for life, or are concerned about outliving your savings or leaving your family a legacy, you may not want an annuity.
- An annuity isn’t always the best option for a person who is under 50.
- Annuities can be complex and challenging to understand without the advice and guidance of an expert.
Annuities are a time-tested tool millions of Americans use to create predictable, guaranteed income streams. Having at least one annuity in your retirement matrix is a strategy that may help you avoid dipping into your other accounts or starting your Social Security payments too soon. While the annuity product may be somewhat complicated, it offers unique advantages and is the only product that can create a stream of lifetime, guaranteed income.
If you are someone who prefers not to put a cent of your savings at risk, or you fear that you might outlive your money, then you should consult a retirement income specialist and ask them to explain how annuities may solve those issues.