Annuities can be a useful solution in the appropriate circumstances but be careful. There are fees, fees and more fees for every added feature that is presented. You do not receive something for nothing. The "something" may be worth the price paid in your particular situation but maybe not.
Most young people can (and should) avoid them altogether and accumulate wealth through the normal retirement account (401k, 403b, TSP, ROTH, taxable brokerage account, etc.) process. Time is on your side.
At retirement, if you need more than social security to cover your basic living needs, then an immediate annuity may make sense. If you have other pensions, too, providing monthly income then you may not need further annuitization.
25% of your total investable assets is a maximum "rule-of-thumb" to consider placing in an annuity but I also would look at your income sources. There may be no need to annuitize more than for your basic income needs of food, shelter, etc. Investments can provide for the discretionary ("fun") money desires.
Immediate annuities (not indexed to inflation) and bought in phases in retirement may be a workable solution. This is where the first one is purchased and then 5-7 years later another immediate annuity is purchased. The subsequent purchase adds more monthly income as inflation begins to eat into your purchasing power.
Indexed annuities (and there are plenty of blog entries here under the "annuities" label to the left) have caps on what you can earn and are very complicated products. Learn about them first before a salesman shows up.
Hopefully, it is obvious that the monthly payment to you includes "your own money" being paid back to you so do not be misled by guaranteed "rates of return".
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.