2006-06-26 16:44:18 · 4 answers · asked by Sang K 1 in Business & Finance ➔ Investing
Traditionally, an annuity is an underperforming asset.
2006-06-26 16:58:47 · answer #1 · answered by Nick C 3 · 1⤊ 1⤋
Unfortunately it really does depend on numerous factors. There are also multiple types of annuities that you may or may not be appropriate.
For example, an Immediate Annuity is one that would make a lot of sense for someone who has retired and wants the security of fixed payments made to him/her every month for the rest of there lives. Again this is something that most people will look at as they enter retirement and not before.
The other type is known as a variable annuity. This is something I do not highly recommend as there are a number of other investments that one should be looking into first, before they open this type of annuity.
For example, a typical way to invest for retirement for those who work at jobs who offer 401k's is as follows:
1) invest in a 401k up to the match
2) open a Roth IRA and invest the max
3) max out the 401k
That's about $19,000 if you're under 50 and if you're over you can put in even more. If you are over 50 it jumps to a maximum of $25,000. If after that you still wish to invest in an annuity it "may" make sense as long as you do your research on the multiple products out there.
Annuities have notoriously high fees and surrender charges. What the annuity allows you to do is invest in mutual funds and then puts an insurance wrapper around it that many advisors will tell "protect" you in case of a loss. What it does is upon one's death it makes sure that their beneficiary gets at least what they put in or more depending on the value of the annuity when they pass.
The thing is that this is really an unnecessary product if you haven't already invested in the other types mentioned above.
Regarding Surrender Fees, once you sign up you will be typically handcuffed and not able to pull out your funds without a hefty fee (sometimes as high as 7-10%!)
Not a great deal. So make sure if you do wish to invest in one that you find one with no surrender charges and minimal fees (<1%...try TIAA-CREF or Vanguard)
Also, you should never open an IRA within an annuity. This makes no sense and I would caution you to raise an eyebrow should and advisor recommend this approach. I've sourced a couple articles for your review that may help with your decision.
HTH
2006-06-26 17:52:07 · answer #2 · answered by Jesse 2 · 1⤊ 0⤋
It depends on how you handle money. If you really suck at it and need a fixed income or you will spend it, then it's the way to go. If you are somewhat competent, I-bonds give a better return. If you do well with money, then stocks and real estate is better.
2006-06-26 17:18:26 · answer #3 · answered by gregory_dittman 7 · 1⤊ 0⤋
No.
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2006-06-26 19:07:20 · answer #4 · answered by Anonymous · 0⤊ 0⤋