The Savage Truth on Money, 3rd Edition

CHAPTER 9The Savage Truth on AnnuitiesRisks and Rewards

Annuities were originally designed to offer income for life—no matter how long you live! Now, many annuity products offer the tempting attraction of tax-deferred growth of your money, even before you may decide to withdraw that income. At that point, you’ll have choices to either take out some of the value as needed, or create lifetime income over your life, or a joint life with your spouse. Lifetime income is the unique benefit proposition that only annuities offer—guaranteed payments, regardless of how long you live.

It’s a deal that sounds too good to be true. And in many cases, it is. That’s why it’s so important for you to understand the various types of annuities, the costs and restrictions, and the hidden traps that can cost you plenty if you don’t make the right choices.

These days, as a generation of retiring Americans must make decisions about rolling over 40l(k) plans that grew their assets in a historic bull market, there are salespeople dangling promises of both growth and income through annuity products. Since annuities can only be offered by insurance companies, these salespeople—and their “free lunches”—are not required to be fiduciaries with your best interests at heart. Instead, you may be financing their retirement through the commissions you pay!

Remember, when buying an annuity, it’s not the possibilities or illustrations in the sales pitches that matter. The only things that really count are the contractual ...