I keep vacillating between the security of the annuity versus the volatility of the stock market, but the growth would be limited to whatever the annuity contract states. I’m 68 years old and I only have a modest social security income and my savings from when I worked. The decision whether or not to buy an is difficult!
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Hey there @barbara.j.wheeler! While guaranteed income for life is very appealing, annuities aren’t your standard investment. They’re actually an insurance contract, so they’re more complex, less liquid and can carry a bevy of fees. Plus, as you mentioned, your potential earnings are always capped.
Most annuities require a big upfront contribution (think $100,000 and up). That might not be an issue for you, but you’re boxed in to specific withdrawal dates and can’t take out large amounts of money without paying hefty fees. This can be a nightmare if a large expense comes up or your priorities change and you don’t have enough liquid cash in your savings to cover it.
Most people who recommend annuities are insurance brokers, not fiduciaries. They often earn commissions on annuity sales and are NOT required to put your interests ahead of their own.
Annuities are an option for some people, especially high income earners. If you’re set on an annuity, your best bet is a fixed annuity with as high an interest rate as possible with minimal fees and simple terms.
A single premium immediate annuity could also work.
Make sure you do your due diligence and receive an unbiased 2nd opinion.
To me, a better option is sitting down with a certified financial planner and discussing the best way to protect your nest egg while it grows a little interest. Different bonds and certificate of deposit ladders can be a great alternative for retirees, especially if you work out a personalized draw-down strategy with a CFP.
Hope this helps and happy to answer any questions!
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Thanks very much Rachel! You put forth a lot of important points for me to think about.
Hi @ Barbara J Wheeler. I just thought I’d chime in. I’ve owned a fixed index annuity since 2016. As stated by @ Rachel Christian, there are definitely pros and cons. Overall I feel like it was the right choice for me. (I’m rather risk-adverse) ?? A couple of things that attracted me to this particular product is they offered a 10% signing bonus as well as you get to withdraw 10% of your balance penalty free annually. Hope this helps!
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Thanks for your response Brigat. Now that I’m getting older, I’m becoming more and more risk adverse, so I appreciate your reply. If I do decide to take the plunge, it would be a fixed rate simple annuity. The less complicated, the better!!
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