It’s naturally to look ahead for new opportunities, new investments, and new ventures. Despite a rocky 2020, the potential for future growth seems boundless for the savvy investor or financier. No matter your goals, now’s the time to plan the bold moves that will get you there.
That having been said, we should discuss the subject of annuities. Annuities are growing in popularity–count yourself lucky if no one’s tried to sell you an annuity already. In brief, an annuity is an agreement between you and an insurance company in which you deposit a set amount with them and they pay you regular disbursements either starting immediately or at some point in the future. Under some circumstances annuities can be a useful tool, particularly for retirement planning. However, there are good reasons to avoid them as well. So, let’s delve into some of the reasons not to buy annuities.
- If you have experience managing your own money, an annuity is likely not the best choice for you. The power of an annuity is in its guarantees. If by contrast you’re accustomed to managing your own money and have been successful in that endeavor, an annuity is likely not the best investment for you. You’ll get a bigger return putting your money elsewhere.
- Whether or not an annuity makes sense depends on your retirement plan and circumstances. To be blunt, if you’re confident that you have enough money to pay for your retirement, an annuity is best avoided. Due to the fees charged for annuities by insurance companies the guaranteed income they offer is offset by what they cost. If you already have enough assets to pay for your retirement, managing them is a better expenditure of your time and money.
- Next, it’s important to note that annuities make it more difficult to adapt to changing circumstances. We all like to think our retirement is a settled guarantee, but the reality is that life keeps evolving even when we’ve stopped working. A sudden change in circumstances–an illness or unexpected financial strain, for instance–can negate the benefits of an annuity in a hurry. This isn’t to say that annuities are always a bad idea, but you should work to build more flexibility into your retirement planning.
- Annuities make it easy to fall for a sales pitch from the insurance company. They benefit as much or more than you do from your investment, and they’ll promise the world in order to get you to make it with them. This is typical of a great many financial tools, but it’s especially important to understand exactly what your annuity agreement says and what it does and does not permit you to do.
- As a result of #4, annuities require research and comparison shopping on your part. Finding the right product for you takes time and expert guidance. You’ll want to consult a number of different companies and providers with an experienced eye to find the annuities that work best for you.
Annuities are not to be avoided at all cost, but you should take the time to understand their role and how they may fit into your retirement plan. As always expert financial advice for investment or retirement planning goes a long way towards helping you achieve your goals without undue stress or worry.