5 reasons avoiding an annuity is a smart move for your retirement

Annuities are often recommended by advisors as good options for retirees, and in some cases, they can be appropriate. The positive features of annuities include the potential for lifelong income, regardless of how long you live, and guaranteed death benefits for heirs. Annuities can also offer tax-deferred growth.

However, annuities come with a number of drawbacks, and it’s important that you fully understand what you’re getting into before you decide to buy one. While an annuity can be the right choice for some investors, there are a number of reasons you might actually be better off avoiding an annuity.

They’re expensive

One of the primary drawbacks to annuities is that they are generally more expensive than other investment options. Annuities are contracts with insurance companies, meaning they carry an insurance component. This adds fees and expenses, like mortality and expense charges and administration of contract maintenance fees.

But annuities can also have a host of other fees, ranging from add-on rider benefits to contingent deferred sales charges and subaccount expenses, such as the fees to manage the investment portion of an annuity.

 

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