When it comes to discussing annuities you have to understand what they are and how they work. An annuity basically pays small amounts of money to someone over the life of the annuity’s contract. The problem is that’s just the short version of how they operate. As stated in our earlier post this week on ‘Why you should NOT buy an annuity’, annuities are complex vehicles for investing, so be sure you understand what you’re doing before you do it. In contradiction to my last post, here are five reasons you may want to buy an annuity.
Despite the fact that annuities are highly complex and often paired with extremely high fees, there is no “one size fits all” approach when it comes to people’s finances. While it might be true that annuities aren’t necessary for the majority of the public, there are always going to be exceptions to the rule. With that in mind, here are five reasons to buy an annuity.
Whatever the reason may be, some people aren’t able to get a life insurance policy due to health. Perhaps you have a pre-existing condition they won’t work with you on. Or maybe your bad health makes it too expensive. In cases such as these, an annuity makes sense and allows you to increase the amount of money you’ll leave to your loved ones after you are gone.
If you’re uninsurable, some annuities allow you to add a long-term care rider on top of the annuity. So you can take your money and multiply it in the event you need long-term care. For individuals that can’t be insured otherwise, this may be a good option.
Riders on annuities, whether fixed, index, or variable, offer flexibility backed by the insurance company. As long the insurance company is viable, that rider stays in place. However, remember, there is nothing in life guaranteed except death and taxes.
There are products out there that guarantee your money will double, whether it’s a five, ten, or even fifteen-year return. Fixed annuities, for example, provide a set interest rate, very similar to CDs underneath market conditions.
Some people just can’t handle the emotional roller coaster of the stock market. Sleep alludes them at night when they think there’s a chance they’re losing money. However, it’s possible to find annuities that actually offer protection for your principal. You must be careful though. Any annuity that promises all the best of the stock market with no downside, thereby protecting your initial investment is tricky. These are called index annuities or variable annuities. Just because you have the money in an annuity doesn’t mean the value of the annuity is not going to move up and down. That’s where these principal protection riders come into play.
If you have questions about annuities, feel to reach out. We would be happy to meet with you to determine if annuities or other options are good for you.