Yes, I know you're thinking "Crap, another anti-annuity thread", but this time it's different - at least a little different. This article was written by an annuity salesman (!) and lists the following reasons you should NOT buy one: You don't need an annuity... 1. If you can professionally manage the money yourself 2. If you want real market type growth 3. If you are thinking about replacing your LTC policy 4. If you want everything packed into one product 5. If you are only being shown one product from one insurance carrier 6. If you don't need additional lifetime income 7. If you see no need to transfer risk
They can be good as a small part of a balanced portfolio for the right situations. One of my favorite things about a better variable annuity is the ability it has to act as a pension. Some also transfer lifetime income to spouses and even down generations. Some also have LTC benefits for owners and even spouses, and at least one offers a return of principal death benefit as long as the actual account value at death is at least $1. Another offers income to those below 59.5 without penalty due to a patent they have. They basically are another stream of income for the owner aside from just having things like bonds (that carry interest rate risk and default risk) and dividend paying stocks where the dividends can be cut or eliminated and the companies are subject to market risk.
They also have surrender periods typically lasting at least several years where you are limited as to how much you can take out without penalty. Of course they're also tax-deferred, and can be a very good way to transfer wealth to heirs after death outside of the taxable estate.
This was packed full of useful information. As I am now thinking about retirement and, an annuity was suggested by my sales agent. Actually, I was told by my brother that an annuity was not the way that I should go. That agents point you in that direction because it pays them a very good commission. So, for retirement I am looking at more tradtional methods such as, 401K's or IRA's.
You should definitely not put anywhere near the majority of your money into annuities, and they are generally more useful for those past age 59.5 in most cases.
I rather stick to 401k and IRA myself especially IRA since that is a individual account. The good thing about the IRA is that it is tax-deductible, which I would only be concerned with contributions that were not deducted. If you are someone who collects dividends I do think you have to worry about it getting taxed while in the IRA account.
You don't have to pay taxes on tax-deferred non-insurance retirement accounts until you either start drawing on them or hit that max age where you have to start paying taxes on them. This is assuming it's not a Roth. So dividends, interest, capital gains, etc are not taxed until that point.
Well that is so true I tend to see people invest into stocks and gain dividends and I always wondered about the tax. I guess I can see that you do not have to worry about taxes slashing those capital gains if its an 401k? Or do you have to still pay taxes with the 401k on the interest, dividends, and capital gains?
A few reasons that you should not buy an annuity are Too old or too young. A lack of sufficient assets. Expectation of an unrealistically high return. Probability of needing annuity dollars prior to maturity. Missing a reasonable understanding of how annuities work.
