Saving and planning for retirement is a major concern for most individuals. This results in people looking for the best ways to invest their money and make it work for them. There are many different investments to choose from and they vary on the amount that they pay out based on the risk that is attached to the investment type. When you are looking for investment options, income annuities are something that you will hear a lot about. However, before you choose this type of investment, it is important for you to be familiar with both the pros and cons of income annuities. This is the only way that you can be sure you are making an informed decision about the topic.
What is an Income Annuity?
An income annuity is basically an insurance product that pays out an income over time. This means that you choose to invest in an annuity and then it will pay out to you based on what it earns over time. Here are the pros and cons of income annuities.
List of Pros of Income Annuities
1. Lifetime Income
One of the biggest advantages to choosing an income annuity as an investment option is that it is one that will offer a return for your life. This means that as long as you are living, you can be expected to receive return payments on this type of investment. This is something that many other investments can’t offer. If you are alive, you will be receiving payout from any annuity that you have.
2. Principle Protection
It should also be understood that income annuities come with principle protection. This means that no matter what, you will get back the principle that you invested. You will most likely receive more, but you will at least get back your principle. This means that the amount of risk that you are taking with this investment really is non existent.
List of Cons of Income Annuities
1. Not All the Same
The biggest downside to income annuities is that they are not all the same. This means that many people assume they are getting a great investment, but this is only because they misunderstand the type of annuity that they are investing in. Some annuities can be a great investment, but you need to understand what all the details are beforehand. This will keep you from investing in an annuity that does not offer much of a return.