I have been searching for a balanced and informative article discussing the benefits and risks associated with annuity-based income. The basics of annuities are that you deposit funds with “old, reliable” investment/insurance companies and they guarantee a monthly stipend for the balance of your lifetime. There are many flavors of this fruit, but it boils down to a lump sum now buys an income stream for as long as you live. This can be especially appealing to folks who have no real interest and/or experience in managing money. The payments arrive automatically once you trigger “pay status.”
Annuities are kind of an old school form of investing. They got some bad press in the days of high inflation because most don’t address that issue. Then there is always the risk that you send them $100,000 and a tree falls on you in the driveway as you come back from the mailbox. But should you survive, there is comfort in knowing that every month there is cash flow that does not require directing the broker to sell something to put food on the table or pay the pet insurance.
The attachment seems a great introduction to the subject.
Is an annuity still worth it in today’s economy? Experts weigh in – CBS News
Buyers should shop carefully as there are many options on these “vehicles.” It has been a long time since I was around this investment, but I do have some concerns that merit looking at what the annuity has “under the hood.” In olden days annuities liked to stock up on commercial real estate including malls and office buildings because they seemed an unrelenting source of rental income. Malls have been struggling for some time now and the Covid crisis has caused America to abandon lots of office space. These once solid investments are selling at deep discounts. Even the private bond market has revealed some cracks in its liquidity. But, then again, how much confidence do you have that a 50,000 Dow Jones average (today’s close) can only go up?