Annuity Disadvantages

Nothing in the financial sphere is immune to disadvantages and annuities are no exception.

Annuity disadvantages. Top 5 Cons of Annuities Loss of Liquidity. You can earn little to no interest. Fixed annuities are really meant to be used for retirement savings.

Your income can not keep up with inflation. You can lose control over your investment. There are many pros and cons of annuities.

The Cons of Annuities High Fees. The most obvious and probably most significant CON of annuities is the loss of liquidity. Many annuities come with a surrender fee which you incur if you try to take a withdrawal within the first few years of your contract.

Here are some disadvantages of annuities. They can generate valuable income in retirement and -- best of all -- if you opt for a lifetime annuity. Annuity owners who want to withdraw money from the annuity before a certain period typically 2 to 10 years have matured are often subject to heavy surrender fees.

In addition the safety of an annuity is enticing but their returns can sometimes be weaker than what you might earn through traditional investing. Most annuities come with a surrender period. Beware of the fine print when it comes to annuities.

The pros of annuities. Insurance-based annuities can charge fees for additional add-on benefits. Investors generally use annuities to gain either lifetime income or tax-deferred growth.