Retirement is not as much of a certainty for working Americans as it used to be. Many Americans these days either don’t understand how or can’t afford to start preparing for it, and as a result many people feel that they will have to work past the traditional retirement age of 65 to be able to retire comfortably. One of the most common ways that people prepare for retirement is buying annuities, but they aren’t always the best option. What are annuities? They’re basically just an insurance product that can serve as a source of income in retirement. Here are three times an annuity probably isn’t right for you.
When You Can’t Commit Long Term
One of the major disadvantages of owning an annuity is that they are a long term investment. There are often huge penalties, fees, and charges for withdrawing any of those funds early. If you are not sure that you’ll be able to wait until the time comes that the company will disperse the funds or think that you might need an annuity lump sum payment early, they might not be right for you.
If You Can Invest Yourself
Another time that you should avoid buying annuities is if you’re able to invest your money yourself. Some types of annuities (not including fixed annuities) are essentially just paying a company to invest your resources for you, which could leave your money at risk for losses. If you’re already a savvy investor, you might as well just handle your own portfolio.
If You’re Already Prepared for Retirement
A third reason to avoid buying annuities is if you’re already otherwise prepared for retirement through other avenues. If you already have an IRA or 401(k), buying annuities probably isn’t going to be worth your while.
Do you have any thoughts about why people should or shouldn’t buy annuities? Let us know in the comments. Find out more at this site.
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