Pros and Cons of Annuities

If you have retired from full time work and you want to collect payments for a predetermined amount of time where the tax has been postponed then you need to look at an annuity. Just as there are pros and cons with any investitures, the annuities good and bad points are certainly something to be looked into before you make, what can potentially be, a very large purchase. As we are all living longer these days (80-90 years is becoming increasingly normal), a person is looking to spend one third of their lives as a retire.

So what are some of the annuities good and bad points?

Annuities

You should think about an annuity for tax deferred income once you have placed as much as you can into a Roth/Traditional IRA or a 401K. Annuities are attractive to people as they have the dual benefit of returning a good income plus the tax on them is postponed. Nevertheless, one of the cons of purchasing an annuity, that should be thought about is that the fees can actually cancel out the tax benefits. Some of the expense comes from early ‘surrender fees’ and from the administration of the money so you need to be mindful of both.

All of these fees will add up fast.

It is vital to be aware of all of these types of fees when taking your annuity.

Genworth Annuities

If you have a home loan you can take out ‘borrowed’ tax free payments when you take out a ‘reverse annuity mortgage’. To many retired people, this is an attractive aspect of an annuity. Low income seniors can get tax free payments until they die, giving them long-term fiscal aid for any potential personal and medical cost’s that could arise.

non qualified annuity

Although, when a reverse mortgage annuity is taken out, the holder must be made aware that in the event of their death, their real estate becomes the property of the annuity lender. Reverse annuity mortgages come with strict rules for the applicants when they use banks. It is essential that you understand the fine print of your annuity policy, so you are well informed as to what happens to the (in this case) reverse annuity mortgage when the policy holder dies.

As always, specialist financial help is available, so if you would like to know the ‘good and bad points’ of annuities, and if they are right for you, get in touch with a respectable financial adviser. Your financial adviser will need to explain in easily comprehensible terms, what to expect from an annuity (and what not) and ensure your individual needs are met.

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