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Does an Annuity Make Sense for You?

An annuity is a financial product that allows you to, in a sense, insure your retirement. You pay premiums to an insurance company, and in return you get a regular income stream in the form of annuity payments in retirement. How can you know whether this sometimes complex investment is right for you?

What Matters to You Makes the Decision

When deciding whether to purchase an annuity, your goals and preferences must dictate. Your financial mindset might convince you to purchase a non-qualified annuity in several ways:

  • You want a sense of security. A non-qualified annuity can increase your peace of mind by offering guaranteed income with more safety than stocks, while avoiding the tax burden that might otherwise come with income in your later years.
  • You’re eager to conserve other assets. Annuity payments can be used for things like nursing home care, home health visits or other home services you may need, so that assets like property or investment accounts don’t have to be reduced to pay for them.
  • You’re a planner. Like Social Security benefits or a traditional pension plan, an annuity provides periodic payments so you know you’ll continue to have at least some money coming in. This reliable stream of income can help you budget and plan for how you’ll meet upcoming expenses.

While these motivations may make you more likely to choose an annuity, you should talk to an insurance or investment professional about your specific situation and think carefully before making any decisions.