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Are Annuity Investments Right For Your Future?


When considering the future, many consider an annuity the preferred retirement investment product due to the stream of payments and income it can provide. As they allow you to grow your nest egg in a tax-deferred savings plan, it can be beneficial towards your retirement goals.

But let's look at both sides to determine if annuity investments are right for you. What works for some people doesn't necessarily mean it's the answer for everyone.

Annuities are generally considered safe investments because they offer payments that are typically backed by established insurance companies like Prudential (NYSE: PRU) and MetLife (NYSE: MET). Since these are guaranteed payments, many feel they remove the risk as an investment.

However, we should also look at the other side of what an annuity has to offer. These are investments that require your money to be locked in over a certain period of time. It's also important to note that they can be complex financial products that often have expensive fees, commissions and administrative charges associated with them.

The related fees that come with an annuity are often much more than other retirement investments, but its a trade off, as you are taking less risk at the same time.

When you're shopping for an annuity, be sure to have the features you want that will benefit you the most. A guaranteed minimum income benefit is recommended, since that is when your investment would annuitize and start paying you, rather than you paying into the investment. Other types of built in features to consider include a built-in death benefit along with a reasonable surrender fee in the event you ever wanted to take an early withdrawal from your annuity.

But as with any financial product, there's always a number of questions that should be raised to determine whether in fact it's right for you.

Some say the fees overshadow the benefits, and there are times when the annuity hold determines it's no longer right for them and must sell annuity payments in order to better manage their personal finances and investments. 

If the idea of avoiding investments tied to the stock market, along with offering guaranteed payments sounds appealing, then maybe an annuity is right for you. The important thing is to have the facts so you can make educated and informed decisions and not be full of anxiety before you lock your money into any kind of investment. 

Considering how it can lock up your nest egg, its clear why many are uncertain whether they should buy an annuity to take care of their financial needs. One other suggestion for you to consider - diversify your portfolio to mitigate the risk.

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.


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