Pros And Cons Of Annuities

Everything, whether it relates to finances or not, has its good side and its bad side, and annuities are no exception. Timing is a big factor in making the decision to invest in an annuity so let’s assume that you are in the market. People who are in the market for annuities are typically close to retirement age, and want to keep the cash they currently have while making some additional money in the meantime.
tax deferred annuity
The benefits of owning an annuity are easy to understand and make the product a real possibility for almost everyone at some point in life.
I feel the PROS are:
Earnings Are Tax Deferred: As with an IRA, you do not pay annual taxes. This aspect makes annuities a much better option than alternate methods of saving money, like in money market accounts or CDs.
Money Security: Your cash is completely secure, since a specific amount of cash provisions must be maintained on site. Some of the best companies in the industry are stronger than ever today, which makes an investment in those companies a very solid bet. In addition, each state has a guaranty fund to back up deposits with insurers. Usually that coverage is capped at $100,000, but you should find out what your state law requires.
Availability of Funds: Annuity accounts allow owners to withdraw somewhere between 10-15% of the annuity's total worth without incurring fees or penalties.
Your Yield Is Moderate: Historically, annuities yield a conservative rate of return. Think about your other choices. Right now, CDs are growing at rates of 2%, which can be taxed, while annuities are growing at approximately 4%, which can't be taxed until later. Once the markets stabilize, you will see the returns on annuities rise, as all other investments rise as well. In many areas, you will discover that annuities are a secure and dependable way to endure the market ups and downs.
Maximize Your Income: The Wharton Business School and New York Life worked together to discover the best method for maximizing retirement income. They found that a fixed annuity that changes into a lifetime income stream is one of the most effective choices. After the first year of the contract, all or nearly all annuities can be converted into a monthly income that will continue for the rest of your life. Of course, immediate annuities work the same way except you can start getting money now.
immediate annuities
Conversely, the problem with annuities is that agents sell people products they don't want or need. You need to make sure you understand the downside of annuities so you will know whether or not you've obtained decent counsel.
I feel the CONS are:
They Are Long-Term: An annuity is not the right choice if you need all of your money back in one or two years. You need to limit your annuity funds for those your can commit for at least five years.
Surrender Schedule: There is no upfront sales charge associated with annuity purchases. However, the insurance company will make you pay a surrender charge if you withdraw your money before the annuity matures. Such fees are normal, however be aware that some annuities have early withdrawal penalties that continue for a decade or longer. That will give you less control over your money in the future.
Sales Commissions: Someone will make money when you buy an annuity and there is no way to avoid that. I highlight this point because this is where conflicts of interest arise. It is critical to find out as much as you can so you can recognize the difference between a bad annuity and a good one. Many agents let themselves be influenced by commissions, so they may not let you see all the products available.
Liquidity: Okay, I know what you’re thinking. Wasn’t liquidity listed as a Pro? Yes, I did. This can be an advantage or a disadvantage, and it relates to what I said about short term money. What is the cash going toward? When will you need it? How much will you need? Answer those questions and the rest of the article should give you an idea if liquidity is a pro or a con for you.
I've made it as clear as I possibly can. Before you go too far, realize that there is a lot of gray area in a general sense. Certain details about your individual financial situation will clear that up and make it very obvious as to whether an annuity is the right choice and which specific product is best.
For a Free copy of the Annuity Report, please be sure to visit Bryan Anderson at www.AnnuityStraightTalk.com - annuities pros and cons

By: Brian J. Anderson

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Bryan Anderson is an Annuity Expert and wants you to have a free copy of the Annuity Report available at www.AnnuityStraightTalk.com - annuities pros and cons