Retirement Planning: Annuities and When They May Make Sense
by William Reichenstein
Individual investors are often encouraged to consider annuities of one form or another. Sometimes this comes from an insurance agent or insurance company pushing a particular annuity product, and sometimes annuity investments are part of a retirement program. Annuities are also a distribution option for retirement monies.
Annuities are complex investments that can be difficult for investors to analyze. High costs often outweigh the benefits associated with annuities. In certain circumstances, however, they can be beneficial—particularly when it comes to the distribution option for those who are living off of retirement assets.
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However, in order to understand the benefits, you need to understand how annuities work. In this column (as well as my next), I will provide a primer on annuities. This first article concentrates on annuities as an accumulation option for retirement savings, focusing first on the major features in most contracts and then presenting a framework that will allow someone to decide if an annuity is right for him or her.
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