Like any financial instrument, annuities have pros and cons. Some types aren’t right for some people, just as some mutual funds or other investments are unsuitable for some people.
But some annuities are a perfect solution for some people because they do things no other financial product can.
Here are the top annuity myths and oversimplifications.
1. Annuities are expensive with high fees.
While this can be said for certain types of variable annuities, fixed annuities have no maintenance or annual fees at all (unless you add an optional rider or two).
2. The insurance company will keep all of my money when I die.
Again, this is true only for a very limited number of annuities, so-called “life only” immediate annuities. In fact, almost all other types of annuities are designed specifically to give a payout to your beneficiaries upon your death. Buying an annuity does not mean you are neglecting your beneficiaries.
3. All annuities have high commissions.
In reality, some annuities – notably immediate annuities – have a very low commission. Commissions tend to be higher for more complex annuity contracts like variable annuities and certain hybrid and index annuities.
4. It’s a bad time to buy annuities when interest rates are low.
Forecasting interest rates is tricky with any type of investment. The best interest rate advice I can give you is to choose your goals, buy a product that will meet those goals, and then get a good night’s rest.
Timing the market is as much about luck as it is about expertise.
5. Annuities are always good for the carrier but bad for the customer.
Yes, insurance companies structure annuities to be profitable. Nevertheless, they do offer big benefits to policyholders, too. It’s good business for any company to “win” at the same time the customer “wins.”
When shopping for the right annuity, always look for the one that “fits” best. You will feel most satisfied when you know you have made an investment decision that will do a great job of meeting your retirement goals.
Ultimately, the decision to purchase an annuity is about helping you ensure peace of mind. Whatever your financial goals – for you or for your beneficiaries – you should seek an advisor who will take the time to explain all the implications of the annuity you choose.
Please let me know if you have any questions. I’m here to help! To your incredible FINANCIAL success! “RETIRE BEFORE YOU EXPIRE”
– SHATEKA Husser