Annuities - Pros, Cons, and Levels Of Risk



I read an article in the Sarasota Herald-Tribune by Thomas Heath from the Washington Post and I thought I’d share.

The article discusses some of these basic topics: 

  • There are many types of annuities that can be used for various goals. But ultimately, annuities are the only type of product that can be turned into lifetime income.
  • Guaranteed Lifetime Income Annuities (Guaranteed checks come every month.)
  • SPIA (Single Premium Immediate Annuities - You can start getting guaranteed monthly checks immediately.)
  • Joint Life Annuity (Payments last until the death of the surviving spouse.)
  • Some annuities are taxed and some are not, depending on the source of money.
  • Annuities have pros and cons. So he neither endorses them or warns you to stay away from them either. (As they say, one size doesn’t fit all. You need to review your individual circumstances to decide if an annuity is the right fit for you.)
  • There are many different types of annuities. (It is important to understand the particulars of the type of annuity, as well as the details of your specific annuity, before signing up for one.)
  • Annuities can be relatively simple or they can be complicated, depending on the type you choose.


Excerpts from his article:

"The dumbed-down definition of an annuity — the one I am most comfortable with — is a fixed amount of money paid to someone each month. You typically purchase an annuity from a financial services company, and the firm guarantees income the rest of your life.

Buying an annuity is buying insurance. You pay a company to give you a guaranteed paycheck instead of paying yourself from assets that are exposed to the whims of the stock market. How well or poorly the annuity-issuer invests the money, or the condition of the stock market, is not your problem. You get your fixed payment whatever happens.”1



Final Note: Annuities are long time contracts and they generally have large penalties, if you try to get out of them early before they mature. (Similar to a CD, where there is a penalty for early withdraws before the CD matures.) So you shouldn’t put “all" your money into an annuity, since it will be locked up for a long period of time.  You should diversify by having some liquid savings for emergencies, as well as for future planned expenses.


Please click on the web link below to read the entire article:

https://www.heraldtribune.com/news/20190804/when-it-comes-to-annuities-there-are-pros-cons-and-certain-levels-of-risk


1. Source:  Thomas Heath / The Washington Post
https://www.washingtonpost.com/business/economy/when-it-comes-to-annuities-there-are-pros-cons-and-certain-levels-of-risk/2019/07/05/c6caa588-9f3d-11e9-9ed4-c9089972ad5a_story.html


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Note: Annuities can be confusing to many people. As an "independent licensed agent" I try to explain things to you in simple terms so you feel comfortable making a decision. Then I can help you choose an annuity that you feel best fits your needs from a large choice of different insurance companies. Plus if you choose to work with me you will have personalized service by a local independent agent that can shop rates for you, rather than working with a captive agent working for just one insurance company. If you would like my assistance to discuss and/or start the process of getting an annuity please call me at 941-404-5334.