I heard annuities are bad. Are they?
Long lock-ups, high fees on some types, and hard selling gave annuities a bad name. Those concerns are fair.
The fair worry
If that's what you've heard, I understand the hesitation. You don't want a paycheck that comes with a costly surprise.
The answer
What's unfair is treating every annuity as the same contract. One word covers very different costs, access rules, and benefits.
Some provide income for the rest of your life. That addresses outliving money set aside for income. A contract built for growth does a different job.
So judge the actual contract against what you need your money to do. That includes income, money within reach, and the freedom to change course. A promise of income doesn't cover every retirement need.
The downside
Lifetime payments generally mean giving up control, which can be hard to reverse. Some types can also lose value when their investments fall.
At your consultation
Bring what you've heard to your free consultation. Your retirement advisor will put the benefits and costs beside YOUR needs. Hearing the answer doesn't commit you to buying.
More questions on this topic
- Do I still pay taxes and take required withdrawals?Yes. Pre-tax money still gets taxed, and an IRA's required withdrawals still apply.
- Can I change my mind later?You can usually cancel for a full refund within a set window, often 10 days after you get the contract. Later changes depend on its terms.
- What if the insurance company fails?The insurance company backs the guarantee. It depends on that company's ability to pay. Annuities aren't FDIC insured.