Is an Annuity Right for You?

Brian Carrozzi - October 29, 2013

If you are looking for a retirement product with less risk than those direct investments in stocks and mutual funds, an Annuity may be right for you.  In addition to Annuities being a safer more predictable investment, both fixed and variable annuities are tax deferred and in some cases will yield higher returns than more traditional retirement plans.

Risk Averse Investors or Retirees

If you have recently retired or are about to retire there are many options to consider.  In today’s world with rising costs and employers not taking responsibility for retiree benefits, the fear of having enough income is a real concern.  This fear is a primary motivator in considering an annuity.  Annuities provide a guaranteed income, even if you outlive the investment.  Conversely, if you pass away early, the insurance company that issued the policy retains the money.  Thus, an annuity is a worthwhile investment for a healthy retiree who wants a guaranteed income stream, accepts little or no financial risks and expects to live well into the future.

Balancing Insurance Losses

For those life insurance policies that are underwater, they are generally not tax deductible. However, if you transfer the policy into an annuity, the losses can be balanced against the annuity gains.  This is obviously not meant to be an exhaustive list of what type of person (or investor profile) would benefit from owning an annuity. As with any financial decision, we recommend you speak with a qualified financial professional for more detailed information as it pertains to your specific financial situation.

Safety from Malpractice

Professions carrying a high risk of being targeted by malpractice lawsuits, should make investments which are protected from creditors. For example, physicians, lawyers, CPA’s and other professional consultants can look to an annuity investment as a safe harbor for holding funds with the additional advantages of tax deferral and a secure future, regardless of the state of their practice.

Disclaimer: Annuities are not for everyone. Please seek professional advice regarding tax liability and investing options based on your personal situation.

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