An annuity is an investment in one’s longevity. People buying annuities want security and comfort in the future. Many from the baby boomer generation are rapidly approaching this future, or are already retired. Younger workers with income to invest in ones future should consider such options seriously.
Who Should Buy Annuities
The first group of people who should consider investing in an annuity is the baby boomers. One wants an income apart from social security for support in the future. The risk of the insurance company failing is much less plausible then the market dropping several a hundred or so points across the board and costing near retiree’s large portions of their life savings, as it did in 2008 with several smaller dips since.
Another group of people who should look at annuity returns are those who will be working for years until they will need the payments. Preparing far in advance, with that long for interest to compound will allow for a much larger payout. Visit UIC.edu for an annuity calculator.
Annuity Risk
Just because an annuity is safer than having ones money in the open market does not mean it is impervious to risk. There is always risk of inflation diminishing the worth of an annuity. There is also the risk of the insurance company failing (there is no evidence to show that insurance companies should be expected to fail in the foreseeable future. If one did fail, the government may intervene and bail it out anyway).
Another point one should look at if they are considering annuities even before they look at the market is oneself. People who buy annuities should reasonable expect to live long enough to fully collect the benefit of the annuity. It doesn’t make sense to invest in a future you do not think you will live to see. A UIC study found that “individuals who know themselves to have serious health impairments rarely, if ever, purchase annuities.
Annuity Benefits
The reward of an annuity is, of course, future security. So long as one has the supplemental income, health to expect to see the payout, or just a desire to avoid market risk as retirement, an annuity can be a sound investment work looking into.
By – Domenic Gabriella for RetirementSecurity.com