Annuities are not investments — they're insurance contracts. They're the right tool for one specific problem: guaranteeing you won't outlive your income. Fixed annuities are appropriate when you want a guaranteed return higher than CDs with tax-deferred growth. Indexed annuities are appropriate when you want market-linked growth with downside protection. Immediate annuities are appropriate when you need guaranteed lifetime income now. Annuities are NOT appropriate as your primary growth vehicle if you're decades from retirement and have a long time horizon for market growth.
Key Points
- Annuities are insurance contracts, not investments
- Right tool for one problem: guaranteeing you won't outlive your income
- Fixed annuities: guaranteed return higher than CDs with tax-deferred growth
- Indexed annuities: market-linked growth with downside protection
- Immediate annuities: guaranteed lifetime income starting now
- NOT appropriate as primary growth vehicle for people decades from retirement