The Disadvantages Of Purchasing Annuities

Annuities are a type of investment that is designed to pay you monthly income over your lifetime. These are normally purchased with a lump sum that will pay out at a certain point in time either until death or over a number of years. The advantage of this type of investment is that you are guaranteed income unlike other investment strategies. While there are advantages, you should also consider the disadvantages of this type of investment.

Since it’s guaranteed, you are going to get a lower return on your investment than other investment strategies. There is a price to pay to get that type of guarantee.

You are going to be locked into the price that you get per month. This is harder to protect against inflation. If you get paid over a few decades, the buying power of what you earn will be lower and lower. When you have control of a lump sum of cash, you can change to other currencies and options to protect against high inflation.

You will get even less per month if you want your spouse to benefit from it. Tying the payments to two people will lower what you get out of it.

Even after you and your spouse’s death, the money is gone. This means that nothing is left to your children. If you have the cash in other investments, those can be sold off and given to your children or charitable organizations that you want to invest in.

If you die suddenly after purchasing the annuity, it will be one of your worst investment decisions ever. This is the huge risk involved with annuities.

The best option when you are considering an annuity is to meet with a trusted financial advisor. Ask questions and have them show you the facts. Then you can make an informed decision that you can live with.

Piper is a freelance writer who enjoys fitness and the outdoors. She loves to observe wildlife using her Baush and Lomb binoculars. She enjoys nature, reading and working in the yard. She likes to accompany her husband on hiking trips where they make good use of their binocular camera to get a good pictures of the wildlife they see.

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