The Truth About Annuities

Annuities may solve the problem of lifetime income for workers.

The truth about annuities. On her website Suze Orman offers a definition for annuities. It is able to get a benefit as the market goes up. By contrast a variable annuity pays interest that can fluctuate based on the performance of an investment portfolio chosen by the accounts owner.

In return for a lump sum purchase of an annuity contract an insurance company promises to pay you at some specified point in time an income streamfor as long as you live. Or you can use a fixed index annuity just as a wealth accumulation vehicle where your money can grow tax-deferred. Annuity products often can be misunderstood which may be in part due to a lack of education among consumers.

As with all things annuities have positive and negative aspects. What Is a Fixed Annuity. Pros Of Annuities.

For that reason the annuity is not able to get all the upside of the stock market. Annuities are usually marketed as safe investments with guaranteed income. Common in pension plans annuities to date have not been popular in 401 ks.

ANNUITIES CARRY HIDDEN FEES. Many investors have relied upon annuities to provide safety for their investment portfolios and what most of them dont realize are the potential consequences this can have. Depending on what kind of an annuity you have purchased the insurance company will provide you with certain contractual guarantees.

In fact over the long haul youd be lucky to make 1 per year. Understanding an annuity and its guarantees is essential if an investor wants to make full and effective use of this type of investment. These products can be difficult to understand and all too often misrepresented by the salesperson.