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Challenging A Negative Article About Annuities

While the concerns in Tom Sightings’ U.S. News & World Report article “3 Things to Know About Annuities” are surely valid, he doesn’t tell the whole story about annuities.  There are definitely a lot of details to look into concerning annuities and also some products out there that would not work for many investors, but there are options and annuities that combat the concerns brought up in Sightings’ article.  The article first points out the benefits of annuities, a monthly income stream that will last the rest of your life.

In the author’s first negative point about annuities, he mentions that while they seem simple, they really are not.  That is true.  Most annuities are complicated products and that is why you are best suited to speak with an expert before making any type of annuity purchase.  But the options he lists as confusing are some of the best available options that annuities carry and can help you meet all of your financial retirement goals.  Death benefits, joint annuities for spouses, variable annuities with the option of growing your annuity rates, and fixed indexed annuities tied to a stock market index are all positive annuity options in my opinion.

This article says that there are no guarantees with annuities, but its examples don’t take the whole picture into account.  Yes, inflation adds the risk that your current monthly payment will not buy you as much in a couple decades, but annuities offer the option of purchasing inflation protection.  And while it is true that annuities are not backed by FDIC insurance and are typically subject to the financial strength of the insurance company, most states offer a guaranty of at least $100,000 for annuity products so you do actually have protection.  While there are fees with annuities, doing your homework and using an expert’s help will balance those fees with the benefits you desire to give you peace of mind in retirement.

Finally, the author says that because of low interest rates, it is not a good time to buy an annuity.  Would it be better for all investments if interest rates were higher?  Of course.  But that doesn’t mean it is a bad time to buy an annuity.  Fixed equity indexed annuities whose rates depend on an index and variable annuities give you some guarantees along with the option of growing your interest rates.  Purchasing multiple laddered annuities allows you to take advantage of any interest rate gains in your future purchases.  While everything offered by annuities is not perfect, nothing really is and the benefits of most annuities really do outweigh the current downsides.  We’ve never said that annuities are right for everyone or that the products are interchangeable, but annuities offer security in retirement that few other things can and are great for many people.

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