Are Annuities a Good Investment?
Are annuities a good investment? You can consider annuities as investment products but they also carry an insurance aspect. You can say that the success of your annuities is dependent upon the financial strength of the insurance company that creates the structure for this investment. Annuities are rightfully named on the aspect in which an investor converts the investment into a steady stream of income payments or also known as annuities. So, are annuities a good investment? It all depends on your goal for that money. Do you want to generate steady income in a set date or throughout your retirement life? If you are a conservative investor, you might want to take advantage of it since it offers a steady income flow over the extent of their lives.
Are annuities a good investment? In terms of risk management, they are very promising since they provide a level of protection against sudden market downturns and it can also offer a considerably better return of investments. The money also is tax sheltered until you start withdrawing the money. However they are not the most popular retirement options compared to the IRA or the 401k. So, are annuities a good investment? You can say, yes, but you might want to analyze your options so that you can make better decisions especially if you are going to invest a pretty big sum of money.
Are annuities a good investment? Let’s look at your options first for annuities. We have those fixed annuities and variable types. When it comes to the fixed annuity, the returns are contractual during accumulation and annuitization. This is why it is called fixed annuity. That does not mean the rates will not and cannot vary over the life of the annuity. It just shows that the rate changes are stipulated on the contract that you signed up for. So are annuities a good investment if they are fixed? They are depending on how you wish the investment would work. For variable type annuities, you are investing on sub accounts while on accumulation phase and the returns are based on your chosen investments, be it mutual funds or other types. The choice of investment products work the same way as with mutual funds. Are annuities a good investment if they are variable? You might want to consider the price since they often require a hefty price to acquire. You pay the mortality & expense risk charge which is the insurance component of the annuities. You have to consider the additional costs as well since there are administration fees that you have to pay. The expenses will vary based on your chosen sub-account but it is very common to find fees worth .50 to 1.25%. Just with the insurance component and the management fees, you can accumulate a cost of 2% or even more. So, are annuities a good investment? For variable types, you need to be a serious investor and you have to be ready for high fees.
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