Annuities are considered hot products, especially when it comes to retiring. Millions of annuities are being sold each year, and the insurance companies that sell these annuities are earning billions of dollars every year. There is no doubt that annuities are good for insurance companies, but are they good for people? Even though annuities can play a vital role in a person’s retirement plans, they are not beneficial for everyone. Below are a few reasons why a person should think twice before buying an annuity.
Never buy an annuity if you are successfully able to manage your own money
When a person buys an annuity, they request an insurance company to take over their finances and manage their retirement assets while providing them with a limited monthly income. Insurance companies are more than willing to assist their clients with this, but, of course, the client will be charged an ongoing fee for this service. So, if a person successfully manages their funds without any external help, they should avoid buying an annuity.
No need to buy an annuity if you have enough money to cover your income needs during retirement (regardless of how long you may live)
Accumulating adequate retirement savings can take a lot of time and hard work. However, a person should invest these assets to produce the necessary income needed during retirement. For example, a person can easily invest their assets in mutual funds and pull out a certain amount of money every month to cover the costs of living. As long as a person has enough funds and is not concerned with the unreliable changes in the stock market, they will have a reliable income, so there is no need to buy an annuity.
A significant benefit of getting an annuity is that the insurance companies will guarantee that they will continue to get a revenue, regardless of how the stock market is doing or how long a person will live. However, the insurance company will be charging a large fee to assure this guarantee and even keep the remaining funds if the client dies before the amount left is fully paid out.
There is no need to buy an annuity if your spouse can manage the remaining assets after your death
An annuity also has a “joint-and-survivor” income option that a client can take. According to this, when the main client dies, the living significant other will get a share. Nevertheless, obtaining an annuity with such a feature will significantly decrease the initial amount of revenue, which can be less than a person’s needs during retirement. If a couple feels that both spouses can manage the money without assistance, there is no need to buy an annuity.
If your retirement plans may change
A big marketing point for a secure annuity is an insurance agreement based on guarantees made by the insurance company. Unlike investing in a business, when a person puts their money in an annuity, the insurance company assures them that they will not lose their money. Once they start to pull down income in retirement, these insurance companies guarantee that the client’s revenue will never decrease or stop.
When it comes to retirement, guarantees are good, but with the secure income comes inflexibility. Once a client puts their funds in an annuity and starts to get revenue, they lose control of their assets to the insurance company. Even if their situation changes radically or they get sick. Sadly, there are limited and expensive options available to respond to those changes. This is a significant reason a person should consider all options before buying an annuity.
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