Annuities: The Good, The Bad, and The Confusing
The good news: Annuity products can be structured to strengthen your retirement
financial plan. In many cases, the best type of annuity for retirement is a
fixed lifetime annuity with an annual Cost of Living Adjustment that protects
your income from the affects of inflation. A fixed lifetime annuity gives you an
income stream for the rest of your life – no matter how long you live and it
offers a guaranteed payment – regardless of stock market performance.
The bad news: Annuity products can provide exactly what most retirees need –
guaranteed income. But, there are downsides to an annuity. For example, it locks
up your capital, so you lose flexibility. With an annuity you are trading
flexibility for guaranteed income.
The confusing: Not all annuities are created equal and many annuity products and
features are actually a bad bet for retirees – or anyone. In addition to
choosing between a fixed (the mostly good) or variable annuity, there is
also the matter of deciding where to purchase your annuity and which options to
include on your annuity contract. These options can be incredibly confusing.