Why Buy an Annuity

• Posted By : Braden MacDonald
• annuities, fixed annuities, annuity basics

Reasons for Buying Annuities

Annuities can provide an incredible safety net. Older investors are particularly drawn to annuities as the threat of outliving their money from retirement accounts is a significant risk. Annuities can provide a guaranteed income stream for life, along with guarantee of principal. Think of the annuity as your basement. Laying that foundation will guarantee you have the money to make sure living expenses are met.

In the past, people believed that annuities were for only wealthy individuals or families with a need to either shelter assets or ensure that large amounts of income would be guaranteed. But, alas, insurance companies are successfully marketing annuity products to middle and lower class families who also need to ensure that income continues in retirement. This is especially true as life expectancy for both men and women has increased dramatically of the last 40 years. Annuities are really the only investments that provide options for guaranteed income, a guaranteed return or a guarantee of the Principal.

As annuities represent a financial obligation that may not come due for many years, and then may continue for many years, investors need to make sure that the company will be able to make the appropriate payments. Any investor considering an annuity should always make sure that the company from which he or she buys has a very high rating from each of the four credit rating agencies.

A.M. Best, Fitch, Moody’s Investor Service and Standard and Poor’s each rate insurance companies on the their ability to pay future financial obligations. Another reason for the popularity of annuities is the strength of the insurance companies that sell them.

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