That is a great question! There are several reasons why annuities can be a good investment, and some reasons why they may not be. The downside? the purpose of an annuity is to save up for a later payout, so there are steep penalties for taking out the money early. Once you've put your money in, you have to leave it there for a period of time, so you need to be able to leave that cash alone. You'll need to have an adequate savings, and cash flow to cover whatever may occur before the withdrawal time comes. Depending upon the annuity, there might mot be the return that you might get from an alternative investment.
The pluses? There are great guarantees. You will know exactly what you have at risk, and what your potential gains will be. It's unusual to lose money with the right annuity, and most will guarantee no less than what you started it with, so even if the markets and interest rates tank, you get back no worse than what you put in. Can't say that about bonds, money markets, or stocks. Annuities can also be structured to give lifelong payouts, and include the lifespans of both you and your spouse. Having an income that you can't out live is also a big plus. They are passive investments, which means you don't have to keep track of what they are doing, you buy and let them roll, or look at them once a year and adjust, if you decide to.
The security of knowing you will be receiving a lifelong monthly payment is a huge part of financial peace of mind. Thanks for asking!
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The pluses? There are great guarantees. You will know exactly what you have at risk, and what your potential gains will be. It's unusual to lose money with the right annuity, and most will guarantee no less than what you started it with, so even if the markets and interest rates tank, you get back no worse than what you put in. Can't say that about bonds, money markets, or stocks. Annuities can also be structured to give lifelong payouts, and include the lifespans of both you and your spouse. Having an income that you can't out live is also a big plus. They are passive investments, which means you don't have to keep track of what they are doing, you buy and let them roll, or look at them once a year and adjust, if you decide to.
The security of knowing you will be receiving a lifelong monthly payment is a huge part of financial peace of mind. Thanks for asking!