Annuities: Are They a Good Investment?

Shawn Plummer

CEO, The Annuity Expert

There is a lot of debate surrounding annuities – are they a good investment or not? Of course, the answer to this question depends on your specific financial situation and goals. In this guide, we will explore 13 reasons why annuities are a good investment so that you can make an informed decision about whether or not they are suitable for you.

Are Annuities A Good Investment?

The first question you need to ask yourself is, what are your financial goals? If you are looking for stability in retirement, then an annuity may be a good option. There are 13 types of annuities, each with its pros and cons.

Reasons why an annuity makes a good investment include:

A Guaranteed Income For Life

An annuity may be a good option if you are close to retirement and are looking for a way to guarantee income during retirement. Annuities can provide a stream of income that lasts for the rest of your life, no matter how long you live. As a result, this can be an excellent way to hedge against the risk of outliving your other retirement savings.

Combating Inflation

Another benefit of annuities is that they can help you keep up with inflation. With an annuity, you have the potential to receive cost-of-living adjustments (COLAs) that increase your payments each year to keep pace with inflation. This can be valuable if you are retired and relying on your annuity income to cover basic living expenses.

Deferring Taxes

With some types of annuities, you can defer taxes on your investment earnings until you start taking withdrawals. This can be an excellent way to grow your money while postponing taxes on the growth. When you eventually withdraw, the money will be taxed as ordinary income.

Never Worry About Running Out Of Money

One of the biggest fears people have in retirement is running out of money. With an annuity, you can rest assured knowing that you will have a stream of income for as long as you live. This can give you peace of mind and allow you to enjoy your retirement without worrying about money. Budgeting your retirement savings will be on auto-pilot!

Never Worry About Losing Money In The Stock Market

Another benefit of annuities is that they are not subject to the ups and downs of the stock market. Fixed annuities offer a guaranteed rate of return, which means you will never have to worry about losing money in the stock market. Fixed index annuities offer a rate of return linked to the stock market’s performance while still protecting you from losses in a down market.

Reducing Taxes In Retirement

If you have a significant amount of money saved in a 401(k) or traditional IRA, an annuity can be an excellent way to reduce your taxes in retirement. When you purchase an annuity with after-tax dollars, the money grows tax-deferred, and you only pay taxes on the growth when you start withdrawing. This can be an excellent way to reduce your overall tax liability in retirement. A non-qualified annuity with a lifetime income rider can also be used to create an income stream in retirement with minimum taxes owed.

A Tax-Free Retirement Income For Life

A Roth annuity may be a good option if you are looking for a way to receive tax-free income during retirement. With a Roth annuity, you contribute money that has already been taxed. This means that when you eventually withdraw from the annuity, the money will be tax-free. Adding a lifetime income rider to a Roth annuity can provide you with a way to receive tax-free income for life.

Earn A Guaranteed Interest Rate Higher Than A CD

An annuity may be a good option if you are looking for a safe place to park your money and earn a guaranteed interest rate. With an annuity, you can earn a higher interest rate than you would with a bank CD, and your money is backed by the insurance company and the State Guaranty Association.

Pay For Long-Term Care At A Fraction Of The Cost

If you are worried about the cost of long-term care, an annuity can be an excellent way to pay for it. With a long-term care annuity, you can use your annuity to cover the cost of long-term care expenses. This can be a valuable benefit if you need assistance with activities of daily living or nursing home care.

Retirees Can Participate In Medicaid Without Losing All Their Money

If you are a retiree and need to apply for Medicaid, an annuity can be an excellent way to keep your assets. With a Medicaid annuity, you can retain your assets and qualify for coverage. This can help you pay for long-term care expenses without depleting all of your savings.

Avoid Probate

When you die, your annuity will pass to your designated beneficiary without probate. This can save your loved ones time and money and provide them with immediate access to the money.

There are many reasons why an annuity may be a good investment for you. These are just a few of the benefits that annuities can offer. If you are looking for a way to secure your financial future, an annuity may be the right choice for you.

Offsetting Taxes For Your Beneficiaries

An annuity can be a good option if you are looking for a way to offset the taxes your beneficiaries will owe on your estate. With an annuity, you can add an enhanced death benefit rider that will pay your beneficiaries a larger death benefit. This can help offset the taxes they will owe on your estate and provide them with more money.

Save Money On Fees

If you are worried about the fees associated with other investment options, an annuity can be an excellent way to save money. Most annuities have no management fees or commissions out of your pocket. This can help you keep more money and reach your financial goals sooner.

No Contribution Limits

An annuity can be a good choice if you are looking for an investment option with no contribution limits. With a non-contribution annuity, you can contribute as much money as you want. This can be an excellent way to save for retirement or another financial goal.

Bottom Line

An annuity may be the right choice for you if you are looking for a retirement investment that offers many benefits and guarantees. Request a quote today to learn more about how this type of investment can work for you. An annuity can help reduce your taxes in retirement, provide guaranteed income for life, and much more. With so many options available, it is essential to speak with us so we can help you find the best annuity for your needs.

Are Annuities A Good Investment?

Request A Quote

Get help from a licensed financial professional. This service is free of charge.

Contact Us
First
Last

Frequently Asked Questions

Why should You Not Buy Annuities?

Annuities are long-term investments for retirement, not short-term investments to spend before retirement.

Related Reading

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

Scroll to Top