Paula Hogan , CFP, CFA, is a fee-only adviser based in Milwaukee, Wisconsin, and a frequent speaker and author in the financial planning field. She maintains a website at www.paulahogan.com.


Discussion

James from NY posted over 3 years ago:

it was well worth reading


Harry from PA posted over 3 years ago:

I have never heard a annuity presentation that didn't scare me away.
Key word: inflexible.
Explains why so few (1 or 2%?) of deferred annuities are ever annuitized.
With that said, this article makes the excellent point about spreading risk.
You can't do that on your own.
Same reason home insurance makes sense.
It's also the same argument for holding off on inflation adjusted SS as long as possible.
(Perhaps to be limited to those 55 and over).


Len from NE posted over 2 years ago:

I do think the article lays out the considerations in buying an annuity, but it does not address the tradeoffs in buying an "inflation indexed" annuity. I'd be interested in that analysis.
I'd also mention charitable annuities for people who need an annuity but just couldn't stand to see an 'insurance company' get your hard earned money if you died soon after purchase.


Harvey from PA posted over 2 years ago:

If I withdrew money from a traditional IRA to buy an annuity do I have to pay taxes on the money withdrawn before buying the annuity????


Samuel from LA posted over 2 years ago:

Following up on Harvey's question - can you roll over an IRA to an annuity plan?


Charles from IL posted over 2 years ago:

The IRS states: "Your traditional IRA can be an individual retirement account or annuity." IRS Pub 590 has details about the requirements an IRA annuity much meet and can be read at http://www.irs.gov/pub/irs-pdf/p590.pdf. -Charles Rotblut


Anush Ge from TX posted about 1 year ago:

Is there such thing as guaranteed income Annuity with capital perseverance?


G Rodriguez from NJ posted about 1 year ago:

Would it be better to purchase an immediate annuity from a Rollover IRA account or a Roth IRA account?


Hugh Giblin from NC posted about 1 year ago:

And what are the fees for an inflation-indexed
annuity over and above a regular one?


Richard Hoe from OK posted about 1 month ago:

Doesn't it depend how you, the individual, handle financial behavior? Whether an annuity is good or bad for you depends on how well you know yourself, e.g. what you are likely to do when trouble strikes; when the media is doing its best to convince everyone that the world is ending (it never does, of course, but many expect the worst).

If you know you are risk averse and that you behave badly when there's a financial crisis, a guaranteed lifetime income may be just the ticket. On the other hand, if you are philosophical like Mr. Buffett and know that crises are just experiences to go through (and the best time to invest, incidentally), then an annuity, indexed or decaffeinated, may be a really bad choice.

If you are the kind of person who needs an annuity, please make sure you have adequate cash for emergencies separately from the annuity (some annuities have high expenses AND penalties for early withdrawals), and that you are aware of the trade-off, which is high expenses. High expenses can be okay, since they are usually separate from the income factor, if you behave badly in financial crises, but you need to be aware of them, since, although you (or you and a spouse) will have lifetime income, the cash inside the annuity will typically be gone in 14-20 years.

Finally, annuities are often sold by advisors in order to receive relatively high commissions. The only motivating factor about buying one should be what you personally need for comfort in retirement, or for your tax needs (in the case of a retirement income stream with tax advantages from exclusion ratios).


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