How Stable is an Annuity?

As you plan for retirement, at some point someone will mention annuities to you. An annuity contract is often the ideal way to guarantee a stream of income in retirement, which will make the deal sound appealing to almost anyone. And yet, you will probably wonder whether annuities are really a reliable way to prepare for the future. Like anyone preparing for retirement, you want to make the best possible decisions with your money. Risk and potential for loss are important issues to investigate.

Some types of annuities are guaranteed by the insurance company which issues the contract. In other words, the amount of money you pay into the annuity is protected by the insurance company. These annuity contracts are ideal for those who want to minimize their risk, while earning a conservative, fixed rate of return. If you want to establish a predictable income stream for the future, without exposing yourself to risk, these types of annuities might be a good fit for you.

If you have ever heard of someone losing money on an annuity contract, chances are they were talking about a variable annuity. Unlike immediate, fixed, and fixed rate annuities, variable annuities do carry a potential for loss. These products are invested in bond or equity markets, which can fluctuate from time to time. Variable annuities often carry higher fees, which is another avenue for loss that you might not have considered. Of course, there are valid reasons that some people choose a variable annuity, and they can be greatly beneficial in the right situations.

Before purchasing an annuity, you should thoroughly investigate your options to make sure you understand all of the terms of the contract.  It is also important to realize that rules vary between annuity products and there are many great options today that may have not been options with annuities in the past.  So if you haven’t looked into annuities as a source of retirement income recently, you may be pleasantly surprised to discover many new options with today’s annuity products.

As with all investment and insurance decisions, your level of satisfaction will come down to how well you are educated prior to making a decision.  Take the time to sit down with us and discuss annuity features, benefits, and options.  We’ll assist you in understanding everything and reaching a well informed decision.

15037 – 2015/11/16