Pros and Cons of Annuities

If you have retired from full time work and you want to get payments for a predetermined amount of time where the tax has been postponed then you need to look at an annuity. Prior to making such a large purchase (normally), it is a good idea to examine carefully the good and bad points of an annuity. More and more people are living into their 80′s and that means they can spend as much as a third of their lives in retirement.

So what are some of the annuities pros and cons?

Annuities

You should consider an annuity for tax deferred income once you have placed as much as you can into a Roth/Traditional IRA or a 401K. Tax deferred payments of an annuity are attractive due to their possible high level of return. Although, the fees connected to these plans can be high and could wipe out any tax rewards that they normally bring with them. There are setup and administrative fees to be considered and if you need the cash sooner than you anticipated, there are what’s called, “surrender fees” that are, not surprisingly, pricey.

It doesn’t take long for these fees to mount up.

Your choice of annuity will count on your level of knowledge of these fees.

Genworth Annuities

If you have a home loan you can take out ‘borrowed’ tax free payments when you take out a ‘reverse annuity mortgage’. For seniors who wish to carry on enjoying their lives as they did before, this alternative within an annuity can be very worthwhile. When seniors who have experienced low incomes retire, this facility will sort out their personal and medical requirements for the remainder of their lives and there’s no tax on this money.

non qualified annuity

Nevertheless, a con to be mindful of is that upon an annuity holders death, the lending agency will get complete control of the realty in a reverse annuity mortgage situation. Banks do have very strict rules for anyone applying for the reverse annuity mortgage. As there are so many conditions, specially when the policy holder of a reverse annuity mortgage dies, it is essential they carefully study the small print in detail.

If you would like to learn more about annuities pros and cons, in an effort to work out if an annuity is the right choice for your retirement fiscal planning, you should seek the advice of a certified financial planner. Your financial adviser will need to explain in easily comprehensible terms, what to look for from an annuity (and what not) and ensure your personal needs are met.