The first step in product selection of an annuity is establishing your risk tolerance profile and purchasing product accordingly. The second, specific to this question, is should the retirement account be qualified or a non-qualified retirement account. And lastly, how many years until you retire? The younger you are the more time you have and may be able to take on risk.
The answers to these questions will determine whether you select annuities with fixed interest rates, indexed rates or separate sub accounts using equities and/or bond instruments. If your “effective” tax liability is low, consider non-qualified retirement plan. If you’re “effective” tax liability is high, consider a qualified retirement plan, especial if your employer matched the contributions.
Founder, Abrams Insurance Solutions, Inc., San Diego, CA
A feature that makes annuities a valuable retirement vehicle is their option that offers a guaranteed income that you cannot outlive. Many annuities offer an income rider that pays out a specified income as long as you live. The amount of income is guaranteed from the time you start the annuity. Annuities are the best way to guarantee that you will not outlive your savings, which is a concern of many retirees today. The "best" annuity will depend upon your unique circumstances, but the guaranteed income makes the annuity a truly special vehicle.
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The answers to these questions will determine whether you select annuities with fixed interest rates, indexed rates or separate sub accounts using equities and/or bond instruments. If your “effective” tax liability is low, consider non-qualified retirement plan. If you’re “effective” tax liability is high, consider a qualified retirement plan, especial if your employer matched the contributions.