In a recent article for Physician’s Money Digest, retirement expert David Alemian asked the question “Are Annuities Good or Bad?” We often hear financial experts and regular consumers alike talking about how good or bad annuities are. But the thing is, annuities just can’t be generalized as good or bad. You really have to do the research and see if these products are good for your personal financial plan or not. The author said that after careful consideration, he and his wife determined that annuity products were good for them and they now own two. They were looking to roll two 401k accounts into IRAs and found indexed annuity products to be the best tool to make that 401k annuity transfer. An indexed annuity met their needs of wanting long term growth of their money without the risk of losing money in the stock market.
The key word that Mr. Alemian wants people to understand about annuity products is that they are tools. You use an annuity just like you use any other tool; for it’s own individual purpose. A hammer and screwdriver help build things while a scalpel and stethoscope help doctors work. Annuities help people plan for their retirement. If you use a tool for something other than it’s intended purpose, it won’t likely work. This also holds true for an annuity product. Each type of annuity serves a different purpose in retirement planning. You get the results that you desire when you use a product (or tool) the way it was made to be used. If you need to create an income stream during retirement, you would add an annuity to your portfolio that offers a lifetime income benefit.
Most of the people who believe that annuities are bad actually sell other investments. If someone tells you that you shouldn’t buy an annuity, it’s wise to make sure that they don’t have ulterior motives. Some people don’t like annuities because of false beliefs that they have heard or have been passed down from relatives. We talk about this a lot, but the most important thing to do when considering an annuity and trying to determine if it is good or bad for your financial plan is to do your homework. Speak with an expert, get quotes from multiple insurance companies and look at an analysis about how an annuity would work for you.
Sometimes annuities are not the best tool to meet your financial needs. You will only find that out through diligent research though. Some of the benefits of annuities are that they can protect your money from market losses and create a lifetime stream of guaranteed income. If you are looking for these benefits, an annuity product might be a good tool for you. Annuities, however, lack liquidity so if you are simply looking for somewhere to put your money where you can easily access it, an annuity would not be the right tool to use. Annuities are tools that can help you meet your retirement planning needs if they are used in the way they were intended.
Written by Rachel Summit
Follow Rachel, aka Finance Mama, on Twitter and Google+
