Annuities: Don't Be Fooled

Annuities are no different. Insurance companies, as you probably suspect, are big money making entities. Therefore, whether or not you think you are getting a good deal, they are probably getting a better deal. They don't stay in business by not making money. They have healthy bottom lines because they know how to capitalize on people based on very sophisticated statistics.

The point in telling you this is to make you aware that although the features of annuities can be good, every great feature has a drawback. In other words, in order to be able to offer you a great feature, the annuity has to get something in return. For example, in order to offer you a decent return on your money, they must limit your liquidity. As a general rule of thumb, the less your liquidity and the longer your timeframe, the more apt you are to make more money. All of the features work this way.

Therefore, the bottom line is, don't be fooled. Although on the surface annuities can look like appealing alternatives, it is important to go beneath their surface and to see exactly what it is that they offer and what the drawbacks are. If you can live with the consequences, annuities can offer some decent benefits. But you had better know what you are getting into before you end up on the losing end.

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