Pros and Cons of Annuities

Annuities are one way to provide regular income during retirement. When you buy an annuity, you are basically asking the issuer to send you regular payments for a set period of time or the rest of your life. While there are many different types, it’s important to weight the pros and cons of annuities.

Annuity pros:

• Peace of mind. An annuity provides the equivalent of a “pension”. There’s no worry about the amount, too much or too little, you are withdrawing.
• Guaranteed income. You can set a fixed level of income to receive from an annuity, even plan for inflation. It’s all based on the how much you pay and how much fees are.
• Customization. You can pick and choose which features are important to you. Whether it’s guaranteed level of income, type of investment or earmarking a fixed payout.
• Tax-deferred growth. The appreciation of the value of an annuity’s holdings are tax-free until the payments begin in retirement.

Annuity cons:

• High fees. Most annuity contracts charge high maintenance and operational fees on top of the rider fees.
• Complexity. If you aren’t familiar with how the annuity contract is set-up you may face unwelcome surprises in retirement.
• Low liquidity. In the beginning, annuities will charge high fees to withdraw money.
• High up-front costs. Annuities typically come with high commissions, depending on the way the annuity is setup, the fees may come out at the beginning of your retirement.

In the end, you need to decide if annuities are for you or not. But it’s important to understand annuities and how they work now and how they work when you are ready to retire.

If you are looking for help understanding the pros and cons of annuities, call Jim Rooney at Advanced Insurance Concepts. He works with a variety of insurance companies in Missouri and Kansas. He is licensed to sell Health, Life and Accident Insurance, so call Jim Rooney for all your insurance needs.