Annuities are getting a lot of attention these days. As more people become responsible for their own retirement savings, banks and insurance companies are marketing annuities an attractive option. They are a private sector pension that provides a guaranteed retirement income if you don’t have a traditional pension plan.
An annuity is basically a fixed sum of money you will receive every year. It typically runs for the rest of their life, although they can also be set-up to expire after 25 years. To get one, you turn over your nest egg to a financial institution. In turn, they provide you with regular monthly or annual payments until your death. Like any investment option, there are both positives and negatives to be found with annuities. Depending on your financial situation, you may want to be cautious about using your savings to purchase an annuity. Here are the pros and cons to be aware of with annuities.
First, some of the positives.