Before you add an annuity to your income strategy, it’s prudent to understand what an annuity does and what it doesn’t do.
Essentially, annuities are insurance contracts. They are built to pay lifelong streams of fixed income, protect money from market losses, or offer tax-deferred money growth.
Indeed, billions of dollars sit in these contracts. A large part of that is due to their popularity for lifetime income, or for higher growth potential than with other low-risk interest-earning vehicles.
Nonetheless, there are still a number of myths and misconceptions about annuities. That might be attributable to a few factors, from annuities being fairly complex to misleading annuity marketing and sales tactics being touted.
This isn’t to say that annuities don’t have a place in a retirement portfolio.
Just like with any other financial vehicle, though, they must have a specified role. That can include solving for particular retirement risks, working in tandem with other parts of a portfolio to reach certain goals, or even simply providing peace of mind with predictable retirement income streams.
Let’s break down some annuity myths and misunderstandings, one-by-one, and learn more about them.
