After I had maxed all my contributions and I still wanted to put away some more tax deferred money for retirement then annuities are a solid option. Even Dave Ramsey agrees although he prefers to invest in real estate himself. But for those of us who don’t have the desire or the chops to make it in the real estate market annuities offer another tier of retirement savings.

Also, sometimes you’ll see fixed annuities quoted for a guaranteed x.xx% yield for 3 years, but will have a surrender period of 5 years. This demands that you do some homework and determine the minimum yield to surrender. If it’s guaranteed at 3% for three years and the minimum guarantee on the contract is 1%, then you’ll get a total of 11% guaranteed (3%, 3%, 3%, 1%, 1%). Anything above that is hoping the insurer will pay above the guaranteed rate which is far less often than you might think. This is one area where CDs are much clearer than fixed annuities.

I think the most important thing to keep in mind is that their are products out there that are going to be right for some people and not be right for other. Be an educated consumer and make sure your financial adviser is well versed in what your needs are as an investor. Appreciate the good content!

Thanks!
@annuitymaven

If there were no other alternatives to Annuities that are still guaranteed AND have lesser fees, then the reputation that such instruments have now would be un-earned.

And, without casting aspersions upon the entirety of Life Insurance professionals, I don’t think the majority of annuity investors are Jedi-anything.

So, I agree with Eric.

I have to respectfully disagree. Annuities help out a lot of people regardless of age depending on their certain circumstance.

If anyone product had absolutely no use it would not be in the marketplace. I refuse to believe that those selling them (and I know a lot of them since I work in the industry) are some sort of Jedi Master able to convince truck loads of people to buy them.

Yes, there are fees, but there are also guarantees made by insurance companies, some of which, are rated higher than your local government in terms of safety.

The only thing I would emphasize is that with an annuity you can turn on the stream of income.

So if you were to put in 100 bucks a month for 10 years lets say, you would then have a pot (100*120 montly installments * Growth) that can be taken as a lump sum or as a stream of income for a time cetain, or for the rest of your life.

There are fees and then there are “fees”. It’s impossible to root them all out. Fees impact performance. The mutual funds, that are available, have their own set of warts. (Read Eddleman’s Lies about money to see the warts. He gets most of them.) ALL you can do is look at their performance as it compares to their peers in the market place. I found their performance to be dismal.

Eventually, I gave up. It’s hard to imagine the usefulness of an annuity in today’s interest rate climate. Now if it was during the Carter administration with 21% interest rates, then I’d be trying to lock those in forever.

Your mileage may vary.