Are Annuities Right for Your Plan?

Source: GotCredit

Source: GotCredit

When it comes to personal finance and retirement planning, there is no one size fits all method to follow. Every circumstance and situation creates a need for a different approach. What might be right for you could be the worst option for another retiree.

Usually, an annuity becomes an option for a retiree when they have maxed on more traditional tax-advantageous investment options, like 401(k) and IRAs. As CNN Money noted, “If you have additional money to set aside for retirement, an annuity’s tax-free growth may make sense – especially if you are in a high-income tax bracket today.”

Annuities certainly can be a buyer beware-type atmosphere. Without the proper analysis of your potential investment, you could be investing in a lemon when you wanted stability. It’s why I always stress the mandatory need for thorough research conducted before taking the plunge. Not only should you ask every question you have to your finance professional, but you should research these answers yourself as well. At worst, you’ll find the same information your professional presented you, and now you’ll have more material to make the best decisions for your retirement.

If you’re uncertain if an annuity is right for your investment plan, see if you fall into these situations:

Outliving Your Money? Guarantee Your Income

For those worried that they might outlive their money, an annuity could be the option to ease their fears. With life spans extending and markets always susceptible to volatility, many annuities ensure that you are taken care of regardless the scenario. Immediate annuities could be right for you. Another option to consider is investing in multiple annuities to protect yourself from an insurer potentially going under.

Depending on your advisor, you may hear that an immediate annuity is best. Others might suggest an inflation-adjusted investment to protect you and your heirs. Again, it’s all about what fits you best. Consider all the elements that go into your planning. You have to factor in the annuitant’s age, investment amount and other key factors before determining the proper course of action. If you choose correctly, you can breathe easy knowing your income is ensured while protecting your principle.

Conservative Seniors

The investment landscape shifts as interest rates go lower. As they do, traditional conservative options, like CDs and money market accounts, prove less like the tried and true method they once were.

With annuities, you have various options to match your investment as well as your risk tolerance. While I highlight seniors in this category, any conservative investor could be a fit for an annuity–especially a fixed option. Not only will this conservative approach ensure you have a lifetime income, you now have the opportunity to earn more than other options. The aforementioned CDs and money market accounts definitely have earning potential, but an annuity may be the right fit for you if you’re the kind of conservative looking to generate the most return on your investment.

When comparing money market and bank CDs to a fixed annuity, you begin to see that the annuity investment is the only option that guarantees you income for life. Additionally, it’s tax-deferred accumulation benefits are often alluring to those otherwise considering a non-qualified investment.

Certainly, other individuals fit the bill for an annuity investment–and some in the above instances might be better on another route. However, these are some options worth considering as you move forward in your planning.

Protect Yourself from These Retirement Threats

Source: American Advisors Group

Source: American Advisors Group

“Aging is humanity’s greatest, most important, and most enduring discovery. The discovery and exploitation of human longevity is what has led to the globe-dominating species we have become.” — Dr. William Thomas, M.D.

For most Americans today, retirement begins at around 63 years old and lasts roughly 18 years. After years of hard work, retirees deserve to enjoy their remaining years in a financially stress-free environment. Retirees must have a safe, sustainable retirement income. Several different paths and products that, in addition to your income, should assist your revenue as you near retirement, if needed. No one option is the perfect fit, but with proper guidance and research, you can carve the ideal path for you and your loved ones.

Sometimes, however, threats to your nest egg can arise. It’s crucial that you properly maneuver these potential pitfalls, or your hard-earned retirement could be threatened.


Inflation can take down even the strongest retirement plans. Always keep an eye out for the interest rate in your savings account is paying. With inflation likely outpacing your interest rate, prices on needed goods and services can sneak up on you. This also goes for travel and medical needs.

If you feel like inflation could dismantle your agenda, consider an additional revenue stream like a hybrid annuity.


Going beyond medical costs, seniors require more medical attention regarding daily and long-term care. Over time, they can add up and impact your savings more than expected. Remember to keep prescriptions, doctor bills and hospitalization fees all in the forefront of your mind. If these medical issues arise before you hit retirement, consider that you may have to take time off work. This can impact your earnings and throw off your original plans. If a health issue looks like it could hinder you pre-retirement or during, be sure to adjust your plan accordingly.


When did you start to plan for your retirement? If you answered with a relatively young age, congratulations. You’re putting yourself in a great position. Beginning a 401(k) in your 20s will provide you with a larger and longer return on investment over time. The longer you wait, the less you will have saved. It’s as simple as that.

If your company offers a 401(k) plan, take it. If not, start a retirement option on your own. With life expectancies lasting longer, you’ll want to have stored away as much as possible.


Let’s be real, fees can be confusing, even for the experts. And even when you do understand them, you might find that they are incredibly high! Unfortunately, fees are sometimes an unavoidable aspect of retirement. That’s why you need to make sure that your retirement expert is just that. With a proper advisor in place, you will know exactly what you are paying and when.

None of us like fees, but at least you’ll know what to expect when a payment is expected.


Like fees, taxes can be a costly oversight if you make a mistake.

If your plan includes 403(b)s, SEP IRAs, 457(b) plans and/or Traditional IRAs. you’ll have to factor in minimum distributions once you reach your 70s. Depending on the sum, you could wind up paying a large portion to the IRS each year. To minimize this risk, consider coversion options that may align with your goals. Other options are out there to consider. As always, consult your retirement professional before making any decisions.


The fall of the stock market is a common concern for retirees. Many think that if it crashes as they edge closer to retirement, all their effort goes down the drain. However, your retirement should live out a crash many times over, if planned correctly.

If you find yourself concerned, don’t worry, you have options. Bond funds, mutual funds, ETFs and other investment options can lessen your worries. Choosing the right options and investments should make this a minor issue as you approach your later years.