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Many of our Members ask about annuities, often because their old advisor or a friend mentioned them as a possible tool to save for retirement. But what are annuities, and should you consider them as part of your investment portfolio?
At their core, annuities are insurance contracts you buy from a financial institution. In exchange for your lump sum or guaranteed series of payments, the insurer promises to pay you a regular income, either immediately or in the future.
There are two main types of annuities, fixed and variable. And they are what their name indicates. Fixed annuities offer stable payments, while variable annuities tie your returns to the performance of investment options. Annuities are positioned as a product that can give you peace of mind for your retirement. Sounds pretty good, right?
While that stability sounds nice, it’s not all golden. Some annuities are complex and come with fees that can significantly impact your returns over time. And contractually, they’re hard to get out of without a hefty fee. Locking yourself into an annuity also reduces your liquidity, as that money is tied up.
So before you jump into investing, remember, annuities are “products” that a company is trying to sell you (because they will make money from them), so think carefully before purchasing—and reach out to Range if you're considering them.
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