Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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When it comes to planning for your retirement, you will find that there are pros and cons to each of the many different options available to you, and annuities are no exception.

The pros and cons of annuities should be weighed carefully against your own unique needs and resources as you decide which elements belong in the retirement portfolio that will bring you the most comfort and security.

Use your zip code and the free rate tool to get online annuity quotes now!

The advent of new Internet technologies can help you assess the pros and cons of annuities by allowing you to compare annuity rates with ease, according to your own specifications.

The easy to use tool—accessible right here on this page—will deliver rates from multiple, well-respected insurance companies throughout the United States. All you have to do is type in your zip code.

Since price is a big consideration on the scale of pros and cons, this quick rate comparison tool will give you more information with which to make the decision about whether or not annuities are right for you.

Before you further divide annuities into a list of pros and cons, you should be aware of the ways in which they are already separated. There are two general varieties of annuities: immediate and tax deferred.

  • Immediate annuities allow you to make a lump sum payment on which you can start making withdrawals right away.
  • Tax deferred annuities give you the opportunity to contribute to a fund, either through a lump sum payment or payments over time, that will grow without taxation until you begin to make withdrawals upon retirement.

Compare the pros and cons of annuities below.

The Pros of Annuities

  • Guaranteed income for life- The biggest pro when it comes to annuities is that they provide a guaranteed source of income for the entire duration of your retirement. By giving your insurance company a certain amount of your savings either as a lump sum (immediate annuity) or over time (deferred annuity), you are signing on to a contract through which you will receive regular payments designed to imitate those you received while in the work force. The amount of each payment you receive as part of your immediate annuity is calculated based on the amount of your contribution, the stated interest rate, and your average life expectancy. Your insurance company MUST continue your payments while you are alive. There is also the opportunity—if you so choose—to make sure your heirs receive a “lump sum refund” of all unused funds upon your demise.
  • Tax benefits- You can make a big check mark in the “pro” column due to the tax benefits offered through the use of annuities. The money you put into your annuities earns interest in a tax-deferred manner. As you begin to collect payments back in retirement, you will find yourself the recipient of the additional benefit of only paying taxes on the interest, not on the principal.
  • Personalized retirement planning- Annuities, unlike pension plans or Social Security, do not limit the amount you are eligible to receive in any way. You can contribute as much as you’d like to your annuities. There are also no guidelines as to how much or how little you must make in order to purchase annuities.

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The Cons of Annuities

  • Sales pitches and fees- It can be difficult to understand the nuts and bolts of the complicated annuities machine. One of the cons, therefore, is that it is easy to be lead into making a decision that may not be the best one for your situation. While there are many great annuities out there, it is important to make sure you have a solid understanding of all the fine print before you sign a contract. Be sure to analyze the commission and fee structure to make sure the annuity you choose will have the most beneficial impact on your bottom line.
  • Long-term commitment- Annuities are designed to shelter large amounts of money for long periods of time. Insurance companies do not make it easy to get out of an annuities contract. Expect extra fees and taxes if you need to get your money back early and in full.

Find the Right Annuities for You

Just type your zip code in the annuity rate comparison tool on this page to gain access to rates from a variety of annuities providers. Since rates are one of the most important factors in any list of pros and cons, this convenient technology will go a long way toward helping you make an accurate assessment of the annuities picture. Don’t delay! Start planning for your retirement now.

Enter your zip code and compare online annuity quotes now!