Some investors choose annuities in an effort to avoid risk. They may be attracted to promises of ¡°guaranteed withdrawals¡± or ¡°minimum returns¡± that seem to take the risk out of investing.
For starters, consider annuities for what they are: insurance products. You buy an annuity (either one payment or a series of payments) from an insurance company in exchange for a promise that they will provide you income for either a specified period of time, or the rest of your life. It is insurance against running out of money.
In reality, annuities are complex investment vehicles that don¡¯t always provide the simple ¡°safety net¡± they often promise. They generally have high costs, complex restrictions and other risks that could offset the potential benefits. While annuities may not seem risky at first glance, they may not be the best way to limit the risk of losing money.
This is only the beginning of the information you¡¯ll need to truly understand annuities before you buy one. In this free guide, we¡¯ll cover nine questions you should ask to help determine if annuities should be a part of your investment strategy.