Disadvantages Of Annuities

Here are some disadvantages of annuities.

Disadvantages of annuities. However this can be done with other financial products that are less expensive. For example the fees charged in conjunction with some annuities can be rather overbearing. List of the Disadvantages of Annuities.

For single premium immediate annuities SPIAs cash flow is guaranteed by the issuer for the life of the annuitant. The annuity is not protected against inflation although again it is possible to index link the annuity to offer some protection. Before getting to the annuity disadvantages lets review one big benefit.

A retirement annuity pays out a guaranteed income for life although a disadvantage to this type of annuity is that when you pass away your capital is not passed on to your spouse or family. However other annuity products do not have a great reputation. This can be useful in structuring cash flow.

One reason for this is because of the various annuity types you can choose from. All annuities are subject to the IRS penalty regardless of annuity type. In addition the safety of an annuity is enticing but their returns can sometimes be weaker than what you might earn through traditional investing.

Annuities take risk off the table but even variable options often fail to match the returns provided by a portfolio of stocks and bonds. Fixed annuities are really meant to be used for retirement savings. To be fair there is some truth to that.

If youre young and have room to survive a recession an annuity probably shouldnt be your first choice. All annuities whether immediate or deferred have an Annuity Start Date ASD which is the date that the regular monthly payments initiates. Annuities provide a guaranteed payout.