Annuities backgrounder

Jerry on What You Should Know About Annuities for Your Personal Retirement Savings

 

 

What Is an Annuity?

If you don’t know what an annuity is, you’re not alone. I’ve been asked about annuities many times by friends, family and even financial writers. A recent survey by the Insured Retirement Institute found that one-third of those polled were unfamiliar with annuities, and almost as many had no opinion about them. In a sense, this is surprising since in the U.S. nearly $2 trillion in annuity assets are held by nearly 20 million individuals, and over 10,000 product variations (this may be part of the problem) are offered by hundreds of life insurance companies. In another sense, though, it’s perfectly understandable because as you’ll see, annuities have long been buried under often complex and hard to understand features.

And the truth is an annuity is only valuable when used for its intended purpose, and very few are sought out by investors; rather they have to be “sold” by financial advisors. However, they can be remarkably useful products and represent a crucial retirement income answer far more often than not—the key being matching the right annuity to your personal situation.

Most importantly, annuities can guarantee a stream of income for life and, thus, offer protection against the risk that you may outlive your money. No other commercially available financial product can make that promise.

Next